Money for Nothing and Your Checks for Free: Why the Basic Income Makes More Sense Than You Think
I’m a liberal. Hardcore liberal, actually. I spent a decent amount of my late teens and even early 20s firmly believing that utopian socialism and the elimination of currency were real, viable ideas. But, as the old adage goes, “Anyone under 30 who’s not a socialist has no heart; anyone over 30 who’s a socialist has no head,” and I am now over 30. More notably, I spent the better part of my 20s slowly coming around to how free-market economies, chaotic and lacking in empathy as they may be about it, ultimately do more to improve the lives of the people living in them than any other approach.
Which is why I’m pretty intrigued by an idea that seems to combine both the ideals of my youth with the more sensible (knock on wood) beliefs I’ve arrived at today: the universal basic income (UBI).
The core idea is pretty simple: every adult citizen in the nation receives a stipend from the government that would elevate them above the poverty level and ensure that, no matter how dire their employment situation, they can at least be ensured of basic necessities like food and lodging.
On its surface, this is an entirely untenable idea for many. People have been negatively painting social welfare programs as “handouts” for years, and any way you slice it, this is precisely that: a handout. However, increasingly, there are a number of studies and pilot programs around the world that suggest that, of all the options for dealing with poverty, just giving people money is the best way to go.
So, here’s a good long look at why the UBI is an idea that may finally be getting its due. In three acts.
Act I: Why on Earth Would We Do Something so Crazy?
The basic idea here would be to offer up an amount money that means people aren’t struggling to get housing, food, and other basic needs, but aren’t living in enough comfort that they aren’t motivated to work. So, $15,600 a year would be 133% the federal poverty rate of $11,700, which is the point at which Obamacare subsidies kick in and a person is moved off of the Medicaid expansion (unless you live in one of the states where your Governor is an asshat). One can, and should, fiddle with that number to find a truly optimal level, but this seems as good a starting point as any.
So, what would that really mean?
Well, a lot of things. Most of which, frankly, can’t accurately be predicted by hypotheticals alone. However, let’s start with the labor market.
Poverty is Leverage Employers Can Use to Drive Wages Lower
On a basic level, our labor market is not efficient. Any negotiation that begins from a place where one party needs to make a deal while the other can easily walk away isn’t going to end with an equitable result. As such, American workers are at a disadvantage. As long as they’re faced with the potential for poverty if they don’t have a job, employers possess an extra degree of leverage.
Obviously, that doesn’t describe ALL American workers. If you have special skills or are a member of a powerful union, you’re not negotiating from the same place of weakness. You may even have leverage over your employers in that you’re difficult to replace. Unfortunately, there’s a pretty wide swath of the American workforce that isn’t so lucky.
Currently, more than 40% of American workers make less than $15 an hour, with about 30% of workers falling into the category of“near minimum wage” and about 15 million workers making less than $10 an hour. That’s a figure that gets even more concerning when you consider that the underemployment rate, one that includes part-time workers who would prefer more hours, is at or near 15%.
Of course, it can, and frequently does, get a lot worse. If you’re at or below the poverty level, $30,000 a year (a 40-hour a week job at $15 an hour), is probably going to sound pretty sweet. If you’re trying to negotiate up your hourly wage from $15 an hour, anyone living in poverty is a person your employer could hypothetically replace you with at or below your current wage. Not to mention, someone who’s a constant reminder that it’s a lot better to be working than not.
So how many Americans are living in poverty? That would be 46.7 million, or just under 15% of the total population. If about one in seven people are living in circumstances that would lead them to need additional employment at almost any level of compensation, it’s going to create a specific downward pressure on wages for almost anyone working a low-skill job.
With a basic floor for every American’s earnings, this imbalance is hypothetically corrected. Workers who don’t have to worry about where their family’s next meal will come from won’t get forced into accepting a bad job out of necessity.
Read the rest at Equities.com.