Why Basic Income?
I was recently asked a bit more about Basic Income. I initially wanted to respond on Facebook, but my ideas started to be a bit too large. Here’s the initial comment:
I’d like to see an article that makes a coherent case for universal basic income that identifies real problems it’s trying to solve, explains why those problems would be addressed, and provides at least some supporting data. Right now what I’m reading just looks like wishful thinking.
Taking just one key point, numbers keep getting thrown around saying $x is enough to cover most people’s needs and they wouldn’t technically need to work. What is x, how do you come up with it, how do you deal with regional variations, and what would it really mean to live on $x. Without that kind of analysis the articles basically read “imagine you could take away the need to work and how much more awesome jobs and peoples lives would be.”
The article he was referring to was:
http://www.huffingtonpost.com/scott-santens/minimum-wages-vs-universal-basic-income_b_7957850.html
But he was really asking a deep question that I didn’t have an article with coherent information to present him with. So I made this.
Basic Income — What does it solve?
Poverty
The most visible problem basic income purports to solve is poverty. Plain and simple, giving people money has been proven to be a fairly effective way to prevent them from being impoverished.
This is not as certain an outcome as you might think. There’s a fairly prevalent conception that giving poor people money means they’ll spend it on vices like beer and drugs. That is the reason for our bureaucracy laden low-income distribution systems. We wouldn’t want them spending on the “wrong things”. Certainly Basic Income would allow incorrect spending, but as far as empirical data suggests it doesn’t appear to happen that way.
Joblessness
A good TED talk by MIT Professor Andrew McAffe outlines this concept.
To think a bit about this look at the Bureau of Labor Statistics data on truck drivers you can see there that 870K are truck drivers. Automated trucking will be safer and cheaper and will remove those jobs in the next couple of years. Further, data on food service workers suggests that there are 2.6M employed in food prep. I propose that this robot chef (and others to follow) will endanger half of those jobs. Together that is about 1.4% of our current workforce. This is a subset of the telling trend, automation has been moving up profit but removing jobs. It has been asserted that those jobs will be replaced with Whatever Comes Next(tm). Maybe it will be robot technicians or robot cleaners. That is because people have been predicting the end of jobs for a long time, and they’ve been wrong each time. I’m not asserting that we won’t have jobs, I’m suggesting that jobs for those unwilling or unable to get academic training have been getting more and more scarce. We stand at the precipice of making those jobs even more scarce because a robotic workforce is cheaper and more reliable.
Supporting elderly and mentally ill citizens
Americans have been unable to save sufficiently for retirement.
Elderly abuse is rampant and mostly inflicted by family. The stressor of supporting elderly family often leads to neglect and abuse. Giving the elderly a sufficient basic income will limit these problems.
Similarly mentally ill individuals are neglected, abused and are a significant amount of our homelessness problem. These individuals can all be supported by Basic Income.
Young child care
Evidence suggests that children cared for by their family for the first year are better off. Basic Income would allow the flexibility for a new parent to stay home with their child.
Basic Income — What doesn’t it solve?
It doesn’t solve income inequality
Basic Income is not trying to balance the scales. It is not a swipe from the rich to give to the poor. Not only would such an attempt certainly fail (sorry the game is rigged), it is unnecessary (See feasibility discussion below). Basic Income does make the income inequality problem less important. The “winners” at the top of these charts can keep their money, as long as everyone is given sufficient money to live.
It doesn’t allow you to live anywhere you want
Land is diverse and precious, also any particular area of land is really scarce (there’s only one of it and it can only be used by one-ish person at a time). That means one of Capitalism’s virtues (See below about why we need capitalism) comes into play. When deciding who should get any particular plot of land, whoever can pay more and still survive gets the land. That’s how money works.
This is the reason there is no regional variance for Basic Income. It’s not a method to allow you to live anywhere you want, it is a basic support structure for everyone living. If you say people in California should get more support structure you’re basically saying that people in California have more right to live than people in Texas. Philosophically that seems like a bad idea. Also more practically if you attempted to regionalize the amount of basic income you would have to create a whole structure to support determining how much each region should get. That structure would become another tool to enhance income inequality.
So if we don’t regionalize that means someone living in California gets just the same as someone in Montana, but it’s much cheaper to live in Montana. That statement is true, but it doesn’t have anything to do with Basic Income. If your Basic Income is not sufficient for you to live in a region then you can move to the outskirts of that region, as you are not tied to a job. Or you could move to another region without penalty (as there’s no job transfer).
A tangent to the regionalization argument is something I call the San Francisco problem. Right now there is a lot of contention for housing in San Francisco and well paid citizenry from Silicon Valley are driving up the prices. So if we give everyone Basic Income doesn’t that mean they could drive up the prices even more? I suggest that this is a misleading question, because the answer is: ‘yes, but dollar for dollar you’ll have just as much money available from basic income as the rich guys’. If you choose to spend that money to try and join the housing market you are no worse off than you were before. If instead you turn away and use the Basic Income for added flexibility you’ll be in a stronger position.
It doesn’t solve the medical care problem
Regularly when I discuss Basic Income I am told:
But you have to have socialized medicine too, right?
Not at all. That’s someone else’s problem. There is definitely a medical care crisis in America. The care is way too expensive for what it provides. But Basic Income isn’t a solution for that, nor does it require a solution to work. Healthcare being expensive is unfortunate, and it’s troubling that it would eat out of your Basic Income money. But if you want to solve that don’t do it by trying to complicate Basic Income. I do think that it would allow doctors and nurses who truly want to heal others to provide their services for less as they would need less to survive. In my wild imagination I see roaming doctors who get their Basic Income and treat people for just a bit above the cost of the materials.
Basic Income — How would we do it?
There are no certain answers here, but maybe I can paint a picture.
How much should we give everybody?
The most common number I see is $1000 a month for everyone over 18 (children are adjunct to their parents and would get $300 a month). This number could have originally come from the federal poverty guidelines. Which suggest that after $11,770 you are no longer in poverty. That fairly conveniently lines up with $1000 a month, and that’s a nice round number. Easy to fit on a slogan. But I think a better number would be one derived based on GDP. See the math below, but it looks like about 1/6 of the GDP would be sufficient to distribute evenly through Basic Income. This would be a good starting point and then as robotic automation became more of the GDP that fraction could increase. Automation and efficiency gains could see that number rising until it provided a comfortable living anywhere and money was a unit tracked only when there were large expenditures. But that’s potentially just fanciful, for now basic income of $1000 would end poverty (as it is defined by the federal government).
Should we give you money for making babies?
There is a faction that argues if you give people nothing to do they will just keep making babies. I have no data on the validity of the argument nor do I wish to have the discussion. I will say that if that argument would prevent you from supporting $300 per child there are alternatives.
- You could limit the $300 Basic Income to two children.
- You could provide diminishing amounts just as the current welfare system does.
How would we give out the money
There are a wide variety of options, but the strongest contenders I see are:
Negative Income Tax: It could start on January 1st. You will file income tax for the past year and your tax burden will be reduced by $12k which will make it likely for those living near poverty that they will get a refund. For those who made no income they’ll get the full $12k and be able to spend it that year.
Here I suggest a tangent because I have known sufficient people who realize they don’t have a good mindset for saving money given in a lump sum. I suggest two options for the payment of that refund.
- You can have the lump sum minus 15% immediately.
- You can have the refund disbursed to you monthly and receive the full refund.
This will allow some savings as anyone choosing the first option has saved the government 15%. And it incentivizes spreading the money over the long term.
Living wage: A check could be mailed to you (or direct deposited, or a debit card could be paid into) every month.
How could we pay for it
We need $3.2 trillion to do this (See math below). How could we possibly get there?
Basic income removes the need for a number of current social safety nets. Federal Tax spending shows $851B for Social Security and $370B for social programs, if we cut those out and give them to BI it’s 1.22T. 1/3rd accounted for!
Looking at the federal tax income for 2009 if rather than our sliding scale we instituted a flat tax of 20% it would change government income from 800B to 1.5T which would provide us with 700B more. Putting us about half way.
Further everyone who is employed can be taxed on the first dollar they make. Using the GDI in 2014 you can estimate that with a flat tax of 20% the amount would instead be 3.2T an increase of 1.7T. Though the discrepancy between data from 2009 and 2014 suggests we should lower the increase estimate to probably about 1.3T.
All told, with these admittedly rough numbers 1.22T +.7T+1.2T = 3.22T. That’s what we needed to find and we found it without over-taxing the rich.
Basic Income — Problems
There could be a number of problems with Basic Income that haven’t even been thought of yet. But here are a few common ones
Nobody will work
Without external incentives to work everyone will sit around and then we’ll all starve.
There is some pretty solid evidence that people do work. They are also healthier and better educated. The minor declines in the workforce were attributed to more people staying in school and mothers exiting the workforce to care for young babies. But we still don’t know what the large scale effect might be.
The Trash-man Problem
If you get money for just sitting around, who would want to be a garbage collector?
The answer here is two-fold.
- You’ll have to pay people sufficiently to make it worth it for them. This might temporarily raise the cost of getting difficult or unpleasant jobs done. But that will provide good incentive for quick transition to automation. In the case of garbage collection we’re nearly to full automation, and if we worked on the problem (say spray painting a designated square that would be easy for computer vision systems to see), we could automate fairly quickly.
- Odious jobs can mostly be divided up. Maybe you wouldn’t want a full time gig in a bad job, but if once in a 3 month rotation you took the truck around and gathered garbage and for that you are given a bit of extra money. Perhaps that way you could lessen the burden on individuals.
Lazy people will just sit around
I argue that this is not a problem. We have more workers than we need to perform the necessary jobs. Plus, they already are doing that, in as much as they can, they’re just also being bad at jobs. Far better to allow them to do nothing in peace. I think further that you would be surprised at how hard it is to do nothing for a long time. I think more likely there will be a period where people do less work, and then they’ll get bored. This will be a good opportunity for community groups to work together to produce.
Idle hands are the devils play toy
Yeah, it might be that all these bored people will run around breaking things and tearing things up. But I think we’ll just have to see how big a problem this is. It seems more likely that idle hands will play games and watch television.
People will get depressed when they have no purpose
There is some documentation that the rich are more likely to get depressed and do drugs. This may be an extension of the idle hands problem. But I think the worst part of the problem is that they are lonely. There are a small number of people who don’t have to work and then are available to associate with. Also there’s the stigma of not being employed. These problems look like they will be alleviated by Basic Income rather than exacerbated.
In conclusion
I agree many articles don’t get into the details, and I think there is still a lot to be fleshed out. I welcome discussion of the finer points as well as warnings about potential problems. Many of the articles seem to willfully ignore the problems that might crop up. As you can see in my responses to what problems might arise are lacking in documenting evidence. This is because there haven’t been sufficiently large tests. Just as socialism looked fine on paper Basic Income looks good on paper. I do think the small scale experiments have borne out the concept. But who could possibly imagine what will happen on a large scale like the whole of the US? What possible problems we’ll face. I see lots of good that comes from providing everyone with Basic Income. Maybe that good will outweigh the bad, what do you think?
Appendix
Why do we need to keep Capitalism?
Capitalism does two things very well:
- It helps us decide what to make.
- It helps us decide who gets what if there isn’t enough.
There are no systems that society has found that serve those two ideas better than Capitalism.
Capitalism pushes the decision of what to make down as far as it can: to the individual who might make it and the one who might buy it. This means the people most affected by the outcome are the decision makers. This gives us the best chance to choose the right things to make. Capitalism also provides a clear marker of who should get something if there isn’t enough for everybody. Whoever can pay the most gets it.
You can trace the fall of Socialism to the fact that it didn’t do either of those things very well. The government decided what should be made, and it wasn’t very good at it. The government decided who should get what goods, and it was even worse at that.
Communism works okay in small groups because they can decide together what to make, but often fails with deciding who gets something when there isn’t enough. Also if you tried to move Communism to a larger platform it would get just as bad at deciding what to make.
These two questions are vital to be able to answer for any functioning large scale society (that has scarcity). If you can come up with a better system to answer those two questions please post it. But most other systems eventually devolve back into capitalism, and the ones that don’t tend to rely on some perfect machine to determine what to make.
Basic Income Mathematics
For population calculations I used federal census data. Which gives 243.2M adults and 76.8M under 18. Which if we’re giving $1k per month to adults means 2.918T for them and if we give the kids each $300 per month 276.5B for the kids Which is approximately 3.2T per year.
Looking at the GDP data America’s GDP is 17.5T a year. This means 1/6th of the GDP would go into Basic Income.
