The Case For a Guaranteed Basic Income
and years on, I stand by it. A universal basic income is not feasible in this country. My argument has nothing to do with morality or even practicality. It has everything to do with a population that exceeds 330 million. Still, a guaranteed basic income, where every person or household is guaranteed a certain level of income, is an idea that has merit and is worth looking at as a policy option.
We need more research
First and foremost, let’s talk about what the data does not say: no government has implemented a universal basic income, where every person or household is granted a base income regardless of their economic status. The closest we’ve come is and wider initiatives like .The Alaska Permanent Fund comes closest to meeting the definition of a basic income, and it’s worth noting that it is funded by resource extraction. It is essentially a state-level sovereign fund. These small experiments and larger analogs tell us something important: so-called free money doesn’t stop people from working. Access to additional funds for people in lower socio-economic strata is a boon on nearly every level: economic, social, and psychological.Time and again, small-scale studies find that people who receive even a few extra hundred dollars spend that money on bills, critical goods, and services like medical care. That kind of spending isn’t marginal. It’s impactful at every level. The psychological benefit of that boon alone is immense. Knowing you can pay your bills is life-changing.And when we give people who are at those margins a guaranteed income, when they thrive, they create. They serve their communities. They don’t simply sit around doing nothing. The idea that a basic income is “money for nothing” rests upon two false ideas: that people are lazy and selfish. Are they? They can be and I’m sure that someone will hold up the modern equivalent of Reagan’s slanderous welfare queen to fight against a basic income. But most people want to work, create, and live lives of meaning and value.is the Sam Altman-backed study where, for three years, random families in Texas and Illinois received $1000 a month, with some other families receiving $50 a month as a control group. A (NBER) found that people who received $1000 a month decreased their workforce participation and hours worked, losing $1500 a year in income. Instead, it was presumably spent in leisure . included a less-than-supportive anecdote from a participant who felt that the extra money encouraged reckless spending.It’s worth deconstructing these detractors to a guaranteed basic income as they seem to fulfill the worst fears of such a program. Let’s start with the Reason article. Yes, the abstract of the working paper gives the same high-level numbers cited by Reason. Yet a review of the whole working paper provides significantly more nuance to those numbers.The key here is that the study had participants whose pre-treatment income was between 0% and 400% of the Federal Poverty Level (FPL), with participants averaging about $29,000 annual income. One of their findings showed differences in the effect of treatment depending on whether the participant was over or under FPL before treatment. Likewise, there were marked differences in treatment by education level, gender, and whether or not the household had children.While the study does use time-use survey data to reject the hypothesis that the decrease in labor participation was due to increases in childcare, unpaid household labor, or education, they also found a small uptick in entrepreneurship, albeit not at a significant level. It also found some significance in that those who received cash transfers moved more than those who did not. Overall, it suggests that participants were improving the quality of their lives. draws a similar conclusion.(If you have a good working handle on significance, feel free to skip this paragraph) Statistical significance in research is a specific term that represents whether or not the results are statistically different than zero. In research like this, the group in the study is a sample of the population at large. Because it’s a sample, it should be similar to the whole population, but there could be areas where the sample is different from the population as a whole in a way that matters. In this case, the study found an uptick in entrepreneurship activities in the group under study. However, this could be because this group is more inclined to start a business than the average person. When a result is evaluated, researchers look to see how different the result is from that population as a whole and, if it crosses a threshold — usually 90% or 95%, depending on the field and topic, they will say it’s significant. That threshold means that the researcher is 90% or 95% or more confident that the result in the sample is outside the norm for the population as a whole. When that threshold is exceeded, we call the result statistically significant.
The data shows basic income is money well spent
hosts a that shows how people who participate in pilot programs spend the money they receive; it is everything that supporters of a basic income policy could hope for, with approximately 90% of the money going to living expenses. At that percentage, it’s hard to argue that the money is being wasted.In addition, when we drill into the impact on labor supply, which is the most common concern of UBI detractors, the data shows that when there is a reduction in the labor supply, that reduction is, at best, moderate and more likely to occur for people who are already earning above the FPL.Another thing that the Guaranteed Income Dashboard shows is how small these studies are when both the number of participants and funding are considered. The largest award by one of these studies is $1000 a month, . In other words, none of these studies — not even the Altman-backed one — are large enough to replace working for the participants. .There’s enough evidence to support more research
Studies across the last fifty years and an analysis of the data from basic income programs provide evidence for the benefits of basic income and mixed evidence, at best, for its impacts on things like the labor force. The question of fairness is harder to address, as is the morality of “money for nothing”.My argument against this is twofold: the mixed evidence of the impact universal income has on the labor market shows that even when people reduce their working hours or leave the workforce entirely, they generally do so in favor of activities that still have social and economic value, such as parenting and education. Finally, even if recipients in the “worst-case” scenario withdraw from the workforce, it’s work looking at what they are doing instead. Even the NBER working paper shows that people aren’t completely leaving the workforce. Instead, they are slightly reducing their working hours.Another point that honesty compels me to make is that we need more than the basic income experiments to run long enough to know the long-term impact of a basic income. I’m a fan of many fiction genres and long-run basic income plans in fiction skew dystopian. While fiction is not reality and is no substitute for real-world anecdotes, let alone data, it shows how we consider this issue. We don’t know what we don’t know, but the data we do have so far is mostly encouraging.Paying for a basic income returns dividends
Beyond just opening the gate to a basic income, we have to think about funding — where the bulk of my — and the Financial Times’ — objections to UBI lie. That aspect of it is a whole issue on its own and, frankly, hits against the “money for nothing” stigma that I hope I’ve shown has limited merit. I think the evidence supports funding a small-scale long-run basic income experiment that gives participants at least income at the Federal Poverty Level. Evidence from that could be the pillar of support for a basic income program on a larger scale. Even if that basic income does reduce labor market participation, as Vivalt et al put it:In other words, people work more than they would otherwise choose because they need the income. A guaranteed basic income may moderate labor participation, but it also opens the door to lifting lower-income households out of an endless cycle of struggle. In other words, a guaranteed basic income could help fund a happier and healthier population.Our analysis demonstrates that even a fully unconditional cash transfer results in moderate labor supply reductions for recipients. Virtually all existing large-scale cash transfer programs in the U.S. are means-tested, which provides additional disincentives to work. Rather than being driven by such program features, participants in our study reduced their labor supply because they placed a high value, at the margin, on additional leisure. While decreased labor market participation is generally characterized negatively, policymakers should take into account the fact that recipients have demonstrated-by their own choices-that time away from work is something they prize highly.
References
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Boehm, Eric. “Bad News for Universal Basic Income.” Reason.Com, 25 July 2024, .
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Giles, Chris. Universal Basic Income: The Bad Idea That Never Quite Dies. 26 July 2024, .
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Jones, Damon, and Ioana Marinescu. “The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund.” American Economic Journal: Economic Policy, vol. 14, no. 2, May 2022, pp. 315–40, .
Lab, The Stanford Basic Income. “Home | Stanford Basic Income Lab.” The Stanford Basic Income Lab, . Accessed 12 Aug. 2024.
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Parshall, Allison. “Basic Income Gives Money without Strings. Here’s How People Spend It.” Scientific American, . Accessed 12 Aug. 2024.
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Varanasi, Noah Sheidlower, Kenneth Niemeyer, Katie Balevic, Lakshmi. “Sam Altman’s Basic-Income Study Is out. Here’s What It Found.” Business Insider, . Accessed 4 Aug. 2024.
Vivalt, Eva, et al. THE EMPLOYMENT EFFECTS OF A GUARANTEED INCOME: EXPERIMENTAL EVIDENCE FROM TWO U.S. STATES. NBER Working Paper Series, 32719, National Bureau of Economic Research, July 2024, .
Wong, Venessa. “High- and Low-Income People Both Got UBI. This Is How They Spent It Differently.” MarketWatch, 23 July 2024, .
Originally published at on August 13, 2024.