Basic Income — Part Two: Poverty and Health

How being poor is more than just an economic problem

PC000266: “Cenotaph and Town Hall, Dauphin, Manitoba.” is licensed by University of Alberta Libraries

In his 1964 State of the Union address, President Johnson declared that the War on Poverty had begun. That year saw a flurry of activity to combat the issue, including Job Corps and Community Action Agencies (the latter overseeing programs like Head Start and local food pantries), food stamp expansion, better public school funding, and, in the following year, the creation of Medicare and Medicaid.

LBJ’s programs were a good start, but some people on both sides of the aisle wondered if they were already heading in the wrong direction. On the left, economist James Tobin thought it best to replace the means-tested welfare system with something universal. Similarly, in his 1967 book, Martin Luther King, Jr proposed a simplified welfare system that provided everyone with a middle class income. On the right, economist Milton Friedman preferred the idea of giving people money instead of stuff (or vouchers for stuff, as with food stamps). He introduced the idea of Negative Income Tax (NIT), which would involve the government giving money to people earning below a certain threshold. Instead of taking money out of a paycheck like regular income tax, this system would put money in.

Negative Income Tax had a certain level appeal at first, and over the next decade a number of studies were set up in North America (four in the United States, one in Canada) to explore the reality of this theory. Politicians were primarily concerned with whether NIT would negatively affect the labor market. Would people stop working if they could earn a living wage without it?

Initial results showed that yes, NIT programs did result in a slight drop in work. However, this decrease was almost entirely due to the actions of second-income earners and single mothers. Even with this caveat, support for Negative Income Tax evaporated. When Nixon proposed NIT as part of his welfare reform strategy in 1971, it was voted down. Politicians had decided that this was not the proper way to fight poverty.

One study, however, was able to look at more than economic effects: the program out of Manitoba, Canada, colloquially known as Mincome. This program distributed extra income in two ways: In the city of Winnipeg and in rural Manitoba, a random selection of families were given money. In the town of Dauphin, every family was eligible for this benefit, even those already receiving government assistance. With full saturation, Dauphin was the town to watch. What would happen when all of its residents began receiving extra money?

Data was collected from 1974 to 1978, but it was promptly boxed up and forgotten about. It wasn’t until 2005 that researchers unearthed the data in order to analyze it.

Conveniently, this initial time period overlapped with the beginning of Canada’s universal healthcare program, which had been implemented in all ten provinces by 1966. Researchers looking at the effects of the Mincome program were also able to look at how the healthcare needs of its citizens had changed once the program began. Their biggest finding was a reduction in hospital visits, relating primarily to mental health problems, accidents, and injuries.

Fewer hospital visits is a significant thing, and it speaks to a great unknown. Why did money improve people’s health? For mental health problems, this makes a fair bit of sense. Extra money decreased stress; lowered stress meant fewer symptoms of anxiety and depression. But what about fewer accidents and injuries? How did that happen?

Researchers have a useful term to describe the situation of not having enough resources to be comfortable: economic insecurity. Experiencing economic insecurity doesn’t mean that you don’t actually have enough food to survive, but it means that you’re never certain. Maybe you live paycheck to paycheck just fine but worry that one medical bill could wipe out what little you have — that’s economic insecurity.

Economic insecurity isn’t a tangible thing; it’s a frame of mind. And like so many mindsets, it can be replicated in the laboratory. In one study, researchers split participants up into two groups, with one group writing about a time in their life when they experienced high economic insecurity, and the other group writing about a time of low insecurity. Those who wrote about an experience of high insecurity reported nearly double the amount of physical pain as their low insecurity counterparts.

These lab results mirror the findings that families with higher economic insecurity tend to purchase more over-the-counter pain medication. To put it simply: Being poor causes pain.

Further experiments found that it was a lack of control (or the feeling thereof) that mediated economic insecurity and pain. Not knowing if your paycheck will cover rent, food, and a needed doctor’s appointment can make you feel out of control, which can increase your experience of pain.

What does this all mean? There are two explanations for a decrease in hospital visits in Dauphin, Manitoba. The first is that receiving payments somehow decreased the sheer number of accidents and injuries that people experienced. With all else being relatively unchanged, this doesn’t make sense.

The second explanation is that these payments gave residents a greater feeling of control in their lives, which reduced the pain they felt from their accidents and injuries. The injuries were the same, but the experience was different. If they weren’t in pain, they didn’t need to go to the hospital.

I’ve been going back and forth with myself about whether the United States needs universal healthcare before it can even consider basic income. Partly in order to keep the scope of these essays more narrow, I’ve decided that we can treat these topics individually, and that one does not necessitate the other. But there are still a number of things to consider.

Within the states that have expanded it, Medicaid is able to provide coverage for a huge number of people who would not otherwise be able to afford anything. In order for basic income to allow people to thrive, we will need this, or something similar, to remain in place. What I mean is this: If receiving basic income payments suddenly pushed the majority of Medicaid recipients out of government healthcare and into private insurance, these individuals would wind up spending much of their new money on giant premiums and sky-high deductibles. There would be less money for other necessities, and they’d be back to where they started with high economic insecurity. If we don’t have public healthcare plans that covered everyone, we would at least need to raise the income limit for Medicaid. No one should lose their coverage on account of basic income.

Medicaid is a huge expense shared by both federal and state governments. In 2014, total costs rose to approximately $476 billion. But consider the research outlined above: Along with the typical costs of healthcare, Medicaid is paying to treat the pain that people experience due to being poor. If people were no longer poor, their pain would decrease. Less pain means less cost.

No matter what, a basic income program would require an upfront investment. Maybe we can combine it with some of the existing welfare programs; maybe we’ll wait and see how things unfold. If the results from Canada (and Africa, and Latin America) are any indication, these basic income payments would improve the health of those most in need. In turn, this would decrease the cost of Medicaid, making both systems more affordable. Over time, as basic income allows these families to gain control over their own lives, their healthcare expenses would be no higher than the general population.

Part One: Introduction

Part Two: Poverty and Health

Part Three: Conditions and Motivations

Part Four: The Case For Universality

Part Five: How UBI Will Disrupt Poverty