What about universal not-so-basic income?
Universal Basic Income (UBI) is abuzz among academics, tech billionaires and even governments. Alongside the cheerleaders, a countervailing wave critiquing UBI has dampened the enthusiasm. First, there is the question of what is “basic” — is it merely the calories to sustain life, or does it include the smartphone essential in modern times? Second, the cost. At current levels of spending on social safety net programs, shifting money to UBI (and thus distributing it to more people) could actually increase poverty, leaving two options: increase spending on social safety nets dramatically or target UBI to the poor. The former strategy is remarkably costly — transferring every US citizen an amount equal to the national poverty line would cost $3.8 trillion — and the latter is problematic since targeted programs often fail to reach the intended beneficiaries. These complexities will need to be overcome before any reasonable approach to UBI emerges. This is perhaps not a problem since many propose UBI as a solution to increased automation which will eliminate most jobs in the dystopian future.
So why not start with something simple that addresses the problems of today than something complex addressing the problems of tomorrow? A universal non-basic income — call it UI — could eradicate extreme poverty in a simple, fair and affordable way.
First, give cash. We know that giving poor people cash has scientifically substantiated benefits, people don’t drink the money away and they don’t stop working. Second, keep it simple and fair: make transfers universal. Targeting is expensive and prone to error, whereas a universal transfer requires only that someone prove they have not already received a transfer to get one. Fingerprints and iris scans could do the trick. Third, make it a subsistence transfer rather than an ill-defined “basic income.” For decades, the World Bank metric of $1.90 in purchasing power parity adjusted (PPP) dollars per day has been a widely-accepted measure of extreme poverty. On the assumption that any “basic income” will be more than that, it makes sense to start with the minimum and build form there.
But is it affordable? Drawing on the principles of universality and fairness, perhaps the world’s nations should pay into a UI fund in proportion to what they earn in a globalized and interdependent world. Think of the world as a toll road, with nations driving into the future — the wealthy nations in sport SUVs can go off-road, but still pay the toll to fix potholes for developing countries with worn out suspension, and the regular commuter pays more tolls than the weekend motorist. It’s a “give to get” model, where no country receives UI payments unless they contribute their share in return.
Let’s suppose that the total cost of a $1.90 PPP universal income is allocated to nations in proportion to their share of world GDP. Under this approach, the most any country would pay into the UI fund is 2.6% of GDP (Quatar). The US would pay 2% of GDP, or $0.02 per $1 earned. On the other end of the spectrum citizens of the Central African Republic would receive transfers equal to 99% of GDP (while paying in $55 million). In middle income countries, like Argentina and Uruguay, it would be a wash — they would pay into the UI fund what they took in return.
In low-income countries, a UI of $1.90 PPP per day can literally be the difference between life and death. But what would it mean in a country like the US? While 2% of GDP is not an inconsequential sum of money, the benefits might outweigh the costs for most Americans. A person earning less than $35,000 per year — representing about 40% of US households — would receive more from the UI fund than they paid in. For the very poor, including the estimated 1.5 million American households with almost no cash income, $1.90 a day will be a blessing. Someone earning the median US income ($55,000) would make a modest net contribution — $400. The top 20% of earners, making $100,000 to $250,000 per year, would contribute $1,000 to $4,000 but could take pride in the contributions they have made, and solace in the fact that they will always have enough for a pound of rice a day should they ever fall into the condition that hundreds of millions of people currently endure.