Basic Income — Part Five: How UBI Will Disrupt Poverty
Why we need it and what it should look like
In the last four essays, I illustrated how poverty affects health and behavior, and how means-tested welfare leads to unnecessary levels of bureaucracy and inefficiency.
In this essay, I will make the argument that Universal Basic Income is the solution to these concerns. I will explore the details of how a UBI program should be structured, and how it will disrupt the welfare and entitlement programs already in place. Universal Basic Income is a more effective and efficient answer to the questions we already tackle, as well as a number of issues that we leave unaddressed.
In 2015, there were 43.1 million Americans living in poverty, including 14.5 million children. No one wants this. No one wants people to live in poverty. That’s why we have a multi-faceted welfare system: We want to prevent this from occurring.
But even within the welfare system, many Americans find themselves trapped. The system itself is a piecemeal one, with different departments handling different programs, and varying restrictions or qualifications for each. Food stamps cut off at exactly the poverty line. TANF has a lifetime benefit of only 60 months, and individuals must find some sort of employment after the first 24 months in order to remain eligible. Adults below the poverty line in the 19 states that did not expand Medicaid are not eligible for federal subsidies in the private market. Even if someone is qualified for a number of services, difficulties just navigating through the programs can result in missed benefits.
People in poverty are constantly told that they’re irresponsible, that their continued poverty is their own fault, and that it’s up to them to fix it. This fear, this intimidation, will make people hesitate before they fight back against being unfairly dropped from a program, or may even stop them from taking advantage of a program at all.
Poverty begets poverty. Once the cycle of poverty begins, it can be difficult to escape. Welfare benefits can help, but these aid programs may only provide enough to make the situation bearable, not enough to change it.
Worse, there are internal hurdles to face in poverty. As I discussed in Part Two, poverty causes pain. Economic insecurity increases the actual, physical pain that people experience. Similarly, in Part Three I explained how worrying about finances can diminish someone’s cognitive functions.
Both of these findings can be replicated in a lab, helping to illustrate (for those still in doubt) that it isn’t a matter of low-income individuals themselves being more susceptible to injury or less intelligent. Rather, it’s the situation, the circumstance, that creates these problems. Poverty creates the problems, and the problems extend the poverty.
Just as poverty can be a vicious cycle, so too can wealth be a virtuous cycle. Give someone money, and they will put it to good use. The cash transfer programs in Africa and Latin America illustrate these effects. In Mexico, the Prospera program resulted in a decrease in teenage pregnancies. In Malawi, money allowed families to keep their daughters at home longer, decreasing the rates of early marriages, early childbirths, and HIV contraction. Families receiving money in Kenya chose to spend less money overall on drugs and alcohol. And families in Namibia were able to use their money to invest in education and better nutrition, which they would not have been able to do with food aid alone. These programs show that people in poverty will behave in beneficial, healthful ways if given the opportunity. If we give people money, they will use it to their advantage.
When we talk about throwing money at problems to make them disappear, it’s usually said in jest. But what if that’s the answer?
Universal Basic Income, or UBI, is a periodic, unconditional cash payment to all adults. Monthly checks, no strings attached. The United States experimented with UBI-style policies in the 1960s and 1970s. Recently the idea has made a comeback, thanks in part to the fears of a bleak job market in our future.
Economists and entrepreneurs warn that automation will change our reliance on human labor for many jobs, including transportation, factory work, and even journalism. With a shrinking job market, poverty levels will rise. Our current welfare system already leaves over a million Americans in extreme poverty, and a further strain on resources will only make the system less reliable. Universal Basic Income could be the solution.
Whether or not our poverty levels rise in the future, UBI can address many of the problems we now face that our current welfare system cannot. Giving people money will help them break out of the cycle of poverty. It will give them control in their own lives and it will give them the freedom to make their own best choices.
Ok... But how do we do it?
Our basic income program must have a number of qualities in order to be most effective:
Unconditional. A number of cash transfer programs already in existence require that participants meet certain conditions, such as going to the doctor or staying in school, in order to receive any cash benefit. As I showed in Part Three, requiring conditions will work against the goal of encouraging long-lasting, positive behaviors. Low-income individuals have the same desire as anybody else to do what’s best for themselves. It’s only because of economic insecurity that they act against their own interest. Giving them money unconditionally will give them the freedom to choose what’s best for themselves.
Most welfare programs in place now are conditional, usually requiring specific employment levels in order to receive payments. If these requirements don’t actually help in the long-term, then they succeed only in furthering the shame that comes from being in poverty. Removing these conditions from payments will minimize this indignity and let people feel like they have value again.
Universal. As I discussed in Part Four, a universal paradigm will minimize the bureaucracy needed to implement the program correctly. Less bureaucracy minimizes the overhead costs, making the program altogether more affordable. Furthermore, less red tape would mean that fewer mistakes would be made when determining who receives the benefit and who does not. A universal program will wind up giving money to those who may not need the benefit, but a means-tested program will miss thousands of people who do actually need the money.
Continuous. A pilot program is fine for figuring out details of how a UBI program would operate, but we won’t know the full effects of UBI until we have a program with no designated end. The program in Oakland is a good start, but it’s only a start. People won’t quit their jobs or move to a new city or start a new business unless they know that the money will continue to come every month without fail. We can’t expect people to change their behaviors if they know that their improved situation is only temporary.
Universal Basic Income does overlap with a number of welfare and entitlement programs already in place. If we implemented UBI, it would necessarily disrupt some of these existing programs. Let us consider here what that would mean.
For our purposes, let’s imagine a UBI program that provides $30,000 to all adult citizens. This amount is roughly what someone would make if they worked 40 hours per week at $15 per hour.
Unemployment. This program is the most obvious one that would be disrupted by UBI. Universal Basic Income would provide a living wage to everyone, whether they were fully employed, just got fired, or anything else. An unemployment benefit would be meaningless.
Social Security. Even just the thought of changing social security could be seen as political suicide, but UBI will change the entitlement landscape. The maximum social security benefit that someone can receive is around $32,000, and that’s only after working for 35 years with maximum taxable earnings. If everyone is already receiving that much through UBI, this program becomes redundant.
The other payment programs that Social Security manage are for the disabled, both the means-tested program for low-income individuals (SSI) and the tax-funded program available to all workers (SSDI). Both of these programs pay out at lower rates than a UBI program would. Replacing these with universal, unconditional payments would give people more control over their lives, especially in towns where going on disability may be their only option.
All programs run by Social Security can be combined or replaced with UBI. A single department handling these payments, instead of two or three, will decrease the size of our bureaucracy. As I explained in Part Four, a smaller bureaucracy will be more cost-efficient and more effective overall.
Food Stamps. This program is our second largest welfare program, with an annual cost of approximately $70.9 billion. As long as UBI payments are higher than the income limits for SNAP (and, at $30k per year, they certainly would be), food stamps would be unnecessary. With Basic Income, no one would qualify for food stamps any longer. The only thing we would lose when cutting this program is the overhead cost.
Medicaid. With food stamps, no longer qualifying is a good thing — it means that families now have enough money on their own such that they can put some towards food. Healthcare is different. Earning above the limits of Medicaid would push low-income families into the bottom level of the private insurance system, which — and I speak from experience here — is not where anyone wants to be.
Broke your leg? Need your appendix removed? Money would come out of the basic income payments and go straight towards medical treatment. As I explained in Part Two, this would be a downward spiral: Less money means more stress and physical pain, more stress and physical pain means more spending on healthcare, more spending on healthcare means less money otherwise, and so on. We need healthcare that is actually affordable in order for UBI to work best. At the very least, families on the lowest end of the income ladder would still need Medicaid.
EITC. The Earned Income Tax Credit is our third largest welfare program, costing the federal government around $56 billion per year. Its main function is to offset the payroll tax for low-income families. The program is both means-tested and conditional, meaning that it’s only available to low-income households and it requires that the person receiving the benefit is employed.
With a basic income program in place, EITC will not be relevant. If an individual is working along with receiving basic income payments, economic security is easier to reach. On the other hand, if there will be fewer jobs available in the future, EITC would have limited benefit anyway.
At the same time, I do think that it would be in our best interest to support low-income families with children. Nothing too extravagant, but something that helps to shoulder the costs that come with raising a child. If we want a country in which no one lives in poverty, then we need to give all children the opportunity to succeed.
Universal Basic Income won’t solve all of our problems. But it will solve a number of them, more than anything we do now. Giving money to low-income families will allow them to gain control over their lives. This control will positively impact their physical and mental health. Keeping the benefit unconditional will give families the freedom to make their own choices, which will enable long-lasting, positive behaviors. Including everyone in the program, and not just those currently in the most need, will decrease the complexity and increase the functionality. Disrupting our existing welfare programs will minimize bureaucratic red tape, allowing this new program to help the most amount of people while still containing costs.
Whatever our future brings, we need to be prepared. Universal Basic Income is the answer to our problems today and our problems ten years from now. What are we waiting for?
Part Three: Conditions and Motivations
Part Four: The Case For Universality
Part Five: How UBI Will Disrupt Poverty
