April 11, 2016


How About a Universal Basic Income? : The idea of a universal basic income is gaining popularity in the U.S. and elsewhere. (Dwyer Gunn, 4/06/16, Pacific Standard)

The U.S. is currently grappling with some major economic challenges. Globalization and automation have fundamentally changed the structure of the American economy, and it's not clear if the new labor market will ever generate enough well-paid, middle-class jobs to make up for those that have been lost. Wages are stagnant, upper-tail inequality has reached astronomical levels, and millions of the poorest Americans are living on less than $2 a day.

The UBI represents a solution to some of these problems -- everyone, rich or poor, employed or unemployed, gets an income sufficient to meet their basic needs (though, in practice, the wealthy would pay more in taxes than their UBI benefit, so the primary beneficiaries of such a policy are the poor). If someone's job is outsourced to Mexico, he's got a fallback. If driverless trucks eliminate one of the last professions that offers a reliable middle-class wage for high school graduates, the displaced could use their UBI to support themselves while they re-train as computer coders, or to supplement their wages if they land a lower-paid job. For single parents raising young kids, they finally receive a living wage for doing so.

Even free-market libertarians love the UBI--it eliminates government bureaucracy, reduces some of the employment disincentives built into current social safety net programs, and is less market-distorting than, for example, minimum wage laws. It might also increase workers' bargaining power, which has been sorely depleted in recent decades, and enable people to go back to school. Here's what Matt Zwolinsky had to say about the UBI in a 2014 article in Cato Unbound:

Not only does the U.S. welfare state spend a lot; it spends it badly. Poor Americans receiving assistance face a bewildering variety of phase-outs and benefit cliffs that combine to create extremely high effective marginal tax rates on their labor. As a result, poor families often find that working more (or having a second adult work) simply doesn't pay. And still, despite massive expenditures by the welfare state, some 16% of Americans are left living in poverty.

Wouldn't it be better just to scrap the whole system and write the poor a check?

Of course, the U.S. already kind of does this, for one demographic: It's called Social Security.

Posted by at April 11, 2016 6:22 AM