A basic income will revolutionize charitable giving
What’s a basic income? An unconditional payment from the government to its adult citizens. In the US, you’re probably looking at something like $1,000 per month.
A basic income is transformative. It constrains runaway wealth inequality. It offers dignity to people who struggle to make ends meet. It promotes social cohesion.
With all these great benefits in mind, I want to focus on a less visible angle: charitable giving. I think implementing a basic income would revolutionize charitable giving. Here’s how.
The power of a separate income stream
It sounds trivial, but an important part of the basic income is that it’s a separate income stream. It doesn’t come packed with your paycheck. It’s separate money, from a separate place, arriving at a separate time.
Why does that matter? Because it’s one less psychological hurdle to giving. When you think of donating, you have to apportion your income. How much do I spend? How much do I save? How much do I donate? If you have a separate income stream, considerably smaller than your earned income, it’s easy to funnel this separate income to charity.
I know it sounds like the smallest of hurdles. But this kind of effort can derail giving.
First, it’s analogous to the advice to pay yourself first, when it comes to saving. If a portion of your next raise goes immediately and automatically to savings, you would never miss it. You didn’t have it in the first place. Empirically, it’s much easier for people to save when they pay themselves first, than when they try to siphon savings off their existing income.
Second, we’re relying on a well-known idea in the worlds of marketing and customer service. You want to make it as easy as possible for your customers to buy from you. Likewise, as a charitable foundation, you want to make it as easy as possible for your donors to donate to you. It’s easier for people to donate if they don’t have to mess around with the logistics of their existing income.
It’s not just important that the basic income stream is separate. It’s also important that it comes from the government. It’s independent of an employer. You won’t have to change your charitable giving arrangements if you change jobs or bank accounts. Once you organize your charitable giving, with the basic income as the foundation, you can leave it alone, for life.
The power of peer pressure
Researchers have documented “peer effects” in charitable giving. Basically, people give more to charity, if they know other people are giving more.
The basic income offers a new avenue for focusing the idea of “peer effects”. Charitable foundations will establish donation tiers and clubs specific to the basic income. It will become a standard, premium giving level. Charities will broadcast their success in attracting basic income donors. “Peer effects” will help them compound their success, as newly-enrolled donors match the gifts of existing donors.
Here’s how
describes the most powerful tribal marketing message: “People like us do stuff like this.” The basic income disrupts both parts of this statement.First, “do stuff like this” means donating your basic income to charity. That concept doesn’t exist today. So the basic income introduces a new behavior around which we can build a tribe.
Second, “[p]eople like us” used to mean the super wealthy. Who else would donate $1,000 per month to charity? But now everyone would receive a basic income. And while the basic income wouldn’t add to the ranks of the super wealthy, it would offer an income stream separate from people’s earned income. The psychology of earned versus unearned income will compel charitable giving. The pool of potential $1,000 per month donors will grow considerably.
Basically, you can build a tribe around people donating their basic incomes to charitable causes. You would have different people focusing on different charities, but the architecture of the tribe would remain. The basic income can help people organize and self-identify in new ways. For social creatures like human beings, this effect is difficult to overstate.
The power of reduced bureaucracy
A basic income can fight bureaucracy. Remember, it’s an unconditional payment to adult citizens. While you have to test whether someone is an adult or not, and whether they’re a citizen or not, you don’t have to test anything else.
Compare the unconditional basic income payment with a government-sponsored tax credit. You only receive tax credits under certain conditions. Take the US education tax credit as an example. You have to test whether
1. The education expenses qualify,
2. The educational institution is eligible, and
3. The student is included in your tax return.
You need a bureaucracy to perform these tests. Audits will be necessary. When you file your taxes, it’s your burden to supply the appropriate paperwork. With a basic income, the burden is negligible, and we can dismantle some of our tax-related bureaucracy.
We get several advantages from reduced bureaucracy. Yes, we get all the expected efficiency gains and cost reductions. Importantly, from the perspective of charitable giving, we get a cleaner connection between the government and charitable foundations.
With less government means testing, donors can have greater confidence that they’ll receive the money they’re entitled to. Charities will have greater confidence that there aren’t unforeseen strings attached to their donations. Collective confidence is key to a market economy, even when that market is charity.
We could see real innovation when charities have access to a more enduring revenue stream. Yes, donors can give recurring donations today. But connecting the basic income to the charitable foundations themselves offers more predictability. As any business will tell you, more predictable revenue equals more efficient investment.
What does investment look like for a charity?
· Marketing, in the search for more volunteers or more donors
· Quality, in providing more valuable goods or services to their target market
· Scale, in building up their operations to serve a larger population
It’s important that a basic income is unconditional. The reduced bureaucracy will fuel more robust connections between donors and charitable foundations. Those connections will help the foundations serve more people, and to support further innovation in the social service space.
The democratizing effect of charitable giving
Capital goes where it’s welcome and stays where it’s well treated. — Walter B. Wriston
As a society, we all win when we help capital flow to charitable organizations. Admittedly, we need to protect against the fraudulent groups that try to take unfair advantage. We need to have protections, so donors have confidence that a group is fairly representing itself. Other than these barest of protections, we need to allow donors and charitable foundations to find each other as easily as possible.
The basic income is an interesting parameter in the charitable giving equation. It’s a separate, unearned income stream that potential donors can easily funnel toward charities. Charities can use the structure of the basic income payments to encourage more people to give, and to build communities around this type of giving. The unconditional nature of the payments eliminates some of the bureaucracy that would otherwise impede capital flowing from donors to charities.
As governments become more complex, and slower to react, charitable foundations become more important. We need the dynamism, and the altruism, offered by charitable foundations and their supporters. The basic income is a great way to shift power to this uniquely transformative part of our economy.
I am the founder of STEM to Business, where I help scientists and engineers build their business acumen and make their strongest contribution.
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