My Basic Income Proposal
Plan A for the universal basic income (UBI) is the simplest version: $1,000 a month for all citizens and long-term residents, unconditionally. Right now, no government is willing to go that far, but some are dipping their toes in those waters. Ontario is piloting a basic income with a negative income tax component, in which the government stipend is reduced by half the recipient’s income. This helps keep costs down, and focuses the funds on where they will have the most impact: no- to low-income people. Finland is replacing unemployment benefits with a two-year UBI to see if this incentivizes more people to find a job. The UBI is expensive and controversial, so the first steps governments are taking are limited and conditional.
The idea I present below incorporates some of the same reasoning of those pilots, and modifies an idea from Roy Bahat around work requirements. The result, I believe, is a politically palatable version that has some interesting additional benefits.
Here it is.
- Everyone — citizens and long-term residents, including those who are undocumented, receive $500 monthly. That’s $6,000 annually, but for reasons I explain, monthly is my preferred rhythm signature. For children under working age, the funds go to their legal guardians.
- Everyone of working age may participate in a public works program. Anyone who volunteers for two full years, receives an additional $500/month for the the rest of their lives. This benefit accrues at $250/year per month worked ($250/year * 24 months = $6,000/year). So, if one works, say three months over a summer, they receive $750/year for the rest of their lives, paid out monthly. If they do the same the next summer, their yearly total goes up to $1,500.
- All of this counts as regular income, and the amounts are chained to inflation. Adjustments are made as needed to welfare cliffs to ensure that no one is made worse off due to a cash transfer.
The unconditional UBI (#1) ends abject poverty. With $500 coming in every month, almost no one will be truly destitute. Homeless people will find places to stay. Parents skipping meals can stop doing that. Kids can get new clothes or school supplies. As for the middle class, they have a little more to work with, a little less anxiety around making ends meet or the specter of a sudden layoff. Broadly speaking, they will save it for a better retirement or spend it, circulating money into the economy. The economic stimulus would substantially swell the economy.
We also essentially provide a parenting fund. Parenting is arduous and expensive (and joyful and incredibly rewarding) and many people live in a difficult mixture of childcare and financial stress. Shrinking the second ingredient in that recipe will be a salve to thousands of families, and this will show up in health and social indicators.
The conditional basic income (#2) is where things get interesting. For greater financial security, one can do work that benefits us — us as in U.S. What kind of work?
Military, Navy, Peace Corps, Teach for America, Habitat for Humanity, eldercare, childcare, nursing, building bridges and rail, installing solar and wind, working in a public school, assisting with scientific or medical research, installing public wifi, working at any level of government in an apolitical capacity. And more! I bet you have some good ideas about where to apply willing and able labor toward the public good. Yes, it will be tricky at the margins determining what counts and what doesn’t, and how best to handle public/private partnerships. Let’s discuss some of the nuances below, and let me know in the comments if you still think this plan has some fatal flaws.
For now, let’s just say:
-I’m very much open to two-year programs that would begin with, say, three months of training.
- Same for work/study programs in which one could accumulate public service hours while in school. Imagine someone in nursing school who accumulates the full two years of public service in a hospital or retirement community over four years of education. Or someone learning to be a welder and repairing bridges and tunnels while not in school.
-Public/private partnerships are inevitable: the government doesn’t need to start a solar company to funnel people into renewable energy work.
-Generally, work done through the public works project would be unpaid in the normal sense outside of the lifelong benefits one receives. We can create exceptions for low-income people and other scenarios where a carve out increases participation. Hopefully the unconditional UBI will reduce the need for this kind of thing.
So, what do we get from this? A lot.
-Massive and ongoing infrastructure work.
-Financial security and meaningful work experience for anyone who opts in.
-Cost savings on the program, largely from those who need it least.
On that last point, some people won’t participate simply because it doesn’t make financial sense to do so. They may be on a career track that would not be rewarded by two years of public service. Or imagine that they are already making $100,000 a year: Do you want $200k up front or $6k a year for the rest of your life? Simple math has these two evening out after 33 years, but working this job for two years is likely to lead to more earning power in subsequent years, as well as the ability to invest the earnings if one receives them earlier. The point is, most people above a certain income threshold won’t opt-in unless they find the public work itself fulfilling. The trick I’m pulling here is to make the program 100% universal — everyone is eligible — but people will opt-in to the degree that the benefits offered are valuable to them.
How about from the government’s perspective? I see this as a great deal for the U.S. as well. More simple math: for a month of labor, the government pays $250 a year in perpetuity for however long that person lives. We’re talking about a very broad set of tasks, and there are managerial and administrative costs to think about as well, so it’s not easy to come up with a simple analysis of how much this labor costs and is worth. But here’s a quick workaround:
-A worker who would normally cost $3,000 a month (36k a year) instead costs that same amount over 12 years (144 months).
-A 48k/year worker breaks even after 16 years (192 months).
-A 60k/year worker breaks even after 20 years (240 months).
So yes, eventually this is an overpay in the simplest terms, but that takes a long time, and the benefits are received up front so that they can compound. This is true whether we are talking about steadily improving transportation, clean energy and IT infrastructure or the benefits of more people working in public education and scientific research. Then there are the societal benefits that come from an individual’s financial security: fewer people in poverty means fewer health and crime incidences. Unemployment insurance spending goes down, if for no other reason than one’s income counts against what one can receive in unemployment benefits. The economy benefits from more people having a higher income floor.
That’s a nice return without even dreaming about some additional, less easily quantified benefits. One point that Roy Bahat emphasized when we interviewed him for the Basic Income Podcast is that entrepreneurship requires a basic income, and that’s why most companies are started by the affluent. Think about the intellectual capital we unlock if we allow people to gain income security in exchange for two years of public service.
Another social benefit: often in poor families, one job per parent isn’t enough to meet all expenses, so a high schooler will take a job or a parent will take a second job. With the UBI and perhaps additional income from the public works program, a parent can spend more time at home or a teenager can spend more time focused on school or in school to begin with. Evelyn Forget found this to be the case in Canada’s Mincome trials in the 70s (and these factors accounted for much of the drop in workforce participation, which was small to begin with).
On a more logistical note, why is this all by the month? The reason is basically that a year is too long. Monthly commitments can fill gaps in ones career and life, and a month that gets aborted midway through is not devastating. If we did this by the year, we run into unpleasant situations such as a person working for ten months but then having a medical issue that ends up delaying the receipt of their first stipend for months or years. This issue doesn’t have to arise from bad news: if someone gets a great job offer, perhaps due to the experience accrued as a public worker, they can finish up their month and take the offer. A yearly system invites awkward scenarios in which a company doesn’t want to wait five months for someone to finish up their government program, but the person has already put in 7 months towards getting $3k annually, and it makes sense for them to finish it off.
In addition to the political appeal of ending poverty, ongoing public works, and the ability to work for lifelong income security, we have one more aspect that will appeal to legislators: options for a slow rollout. We’re spending a lot of money here, and that makes legislators skittish. We could implement the public works program or the unconditional UBI separately (though I prefer them together) or start the UBI with people being born today, so that it functions as a child allowance in the early stages of the policy.
Though a universal, unconditional basic income remains the ultimate goal, we can acknowledge that there are benefits to certain conditions, which make the program more dynamic, affordable and politically acceptable. I am excited by the package of benefits this idea offers, but I bet that you can build on and improve it. Let me know in the comments how you would do that.