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The Paradox of Universal Basic Income
by Joichi Ito
Apr 29, 2018 - 06:00 UTC
Wired Ideas
https://doi.org/10.31859/20180429.0600
A version of this piece appeared as WIRED Ideas: The Paradox of Universal Basic Income on March 29, 2018.
On December 15, 2017, the United Nations Special Rapporteur on extreme poverty and human rights,
Philip Alston, issued a damning report on his visit to the United States. He cited data from the Stanford
Center on Inequality and Poverty, which reports that “in terms of labor markets, poverty, safety net, wealth
inequality, and economic mobility, the US comes in last of the top 10 most well-off countries, and 18th
amongst the top 21.” Alston wrote that “the American Dream is rapidly becoming the American Illusion, as
the US now has the lowest rate of social mobility of any of the rich countries.” Just a few days before, on
December 11, The Boston Globe's Spotlight team ran a story showing that the median net worth of
nonimmigrant African American households in the Boston area is $8, in contrast to the $247,500 net worth
for white households in the Boston area.
Clearly income disparity is ripping the nation apart, and none of the efforts or programs seeking to address
it seems to be working. I myself have been, for the past couple of years, engaged in a broad discussion
about the future of work with some thoughtful tech leaders and representatives of the Catholic Church who
have similar concerns, and the notion of a universal basic income (UBI) keeps coming up. Like many of my
friends who fiddle with ideas about the future of work, I’ve avoided actually having a firm opinion about
UBI for years. Now I have decided it’s time to get my head around it.
Touted as an elegant solution to the problem of poverty in America and the impending decimation of jobs
by automation, UBI is a hot topic today in the “salons” hosted by tech and hedge-fund billionaires. The
idea of UBI in fact is an old idea, older than me even: Either through direct cash payments or some sort of
negative income tax, we should support people in need—or even everyone—to increase well-being and lift
society overall.
Interestingly, this notion has had broad support from conservatives like Milton Friedman and progressives
such as Martin Luther King Jr. On the other hand, UBI also has been criticized by conservatives as well as
liberals.
Conservative proponents of UBI argue that it could shrink a huge array of costly social welfare services like
health care, food assistance, and unemployment support by providing a simple, inexpensive way to let
individuals, rather than the government, decide what to spend the money on. Liberals see it as a way to
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redistribute wealth and empower groups like stay-at-home parents, whose work doesn’t produce income
—making them ineligible for unemployment benefits. In addition, these UBI advocates see it as a way to
eliminate poverty.
Nevertheless, just as many conservatives and liberals don’t like the concept. Conservatives against UBI
worry that it will decrease incentives to work and cost too much, racking up a bill that those who do work
will have to pay. Skeptical liberals worry that employers will use it as an excuse to pay even lower wages.
They also fear politicians will offer it as a rationale to gut existing social programs and unwind institutions
that help those most in need. The result is that UBI is a partisan issue that, paradoxically, has bipartisan
support.
I was on a panel at a recent conference when the moderator asked audience and panel members what
they thought of UBI. The overwhelming consensus of the 500 or so people in the room appeared to be
“we're skeptical, but should experiment.” UBI sounds like a good or not-so-good idea to different
constituents because we have so little understanding of either how we would do it, or how people would
react. None of us really knows what we’re talking about when it comes to UBI, akin to being in a drunken
bar argument before there were smartphones and Wikipedia. But there are a few basic principles and
pieces of research that can help.
Universal Basic Income, In Theory
Much of the resurgent interest in UBI has come from Silicon Valley. Tech titans and the academics around
them are concerned that the robots and artificial intelligence they’ve built will rapidly displace humans in
the workforce, or at least push them into dead-end jobs. Some researchers say robots will replace the low-
paying jobs people don’t want, while others maintain people will end up getting the worst jobs not worthy
of robots. UBI may play a role in which scenario comes to pass.
Last year, Elon Musk told the National Governors Association that job disruption caused by technology
was “the scariest problem to me,” admitting that he had no easy solution. Musk and other entrepreneurs
see UBI as way to provide a cushion and a buffer to give humans time to retrain themselves to do what
robots can’t do. Some believe that it might even spawn a new wave of entrepreneurs, giving those
displaced workers a shot at the American Dream.
They may be getting ahead of themselves. Luke Martinelli, a researcher at the University of Bath Institute
for Policy Research, has written that “an affordable UBI is inadequate, and an adequate UBI is
unaffordable.” I believe that is roughly true.
One of the biggest problems with UBI is that a base sum that would allow people to refuse work and look
for something better (rather than just allowing employers to pay workers less) is around $1000 per month,
which would cost most countries somewhere between 5 percent to 35 percent of their GDP. That looks
expensive compared with the cost to any developed country of eradicating poverty, so the only way a
nation could support this kind of UBI would be to eliminate all funding for social programs. That would be
applauded by libertarians and some conservatives, but not by many others.
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Underpinning the Silicon Valley argument for UBI is the belief in exponential growth powered by science
and technology, as described by Peter Diamandis in his book Abundance: The Future is Better Than You
Think. Diamandis contends that technological progress, including gains in health, the power of computing,
and the development of machine intelligence, among other things, will lead to a kind of technological
transcendence that makes today’s society look like how we view the Dark Ages. He argues that the human
mind is unable to intuitively grasp this idea, and so we constantly underestimate long-term effects. If you
plot progress out a few decades, Diamandis writes, we end up with unimaginable abundance: “We will
soon have the ability to meet and exceed the basic needs of every man, woman, and child on the planet.
Abundance for all is within our grasp.” (Technologists often forget is that we actually already have enough
food to feed the world; the problem is that it’s just not properly distributed.)
Many tech billionaires think they can have their cake and eat it too, that they are so rich and smart the
trickle-down theory can lift the poor out of poverty without anyone or anything suffering. And why
shouldn’t they think so? Their companies and their wealth have grown exponentially, and it doesn’t appear
as though there is any end in sight, as Marc Andreessen prophetically predicted in his famous essay, “Why
Software is Eating the World.” Most of Silicon Valley’s leaders gained their wealth in an exponentially
growing market without having to engage in the aggressive tactics that marked the creation of wealth in
the past. They feel their businesses inherently “do good,” and that, I believe, allows them to feel more
charitable, broadly speaking.
Universal Basic Income, In Practice
If the technologists are correct and automation is going to substantially increase US GDP, then who better
to figure out what to do about the associated problems than the technologists themselves—or so their
thinking goes. Tech leaders are underwriting experiments and financing research on UBI to prepare for a
future that will allow them and their companies to continue in ascendance while keeping society stable.
(Various localities and organizations already have experimented with forms of UBI over the years. In some
cases, they have produced evidence that people receiving UBI do in fact continue to work, and that UBI
gives people the ability to quit lousy jobs and look for better ones, or complete or go back to school.) Sam
Altman, president of Y Combinator, has a project to give people free money and see what happens to
them over time, for instance.
Altman's experiment, prosaically named the Basic Income Project, will involve 3,000 people in two states
over five years. Some 1,000 of them will be given $1,000 a month, and the rest will get just $50 a month
and serve as a sort of control group. It should reveal some important information about how people will
behave when given free money, providing an evidence-based way to think about UBI—we don’t have
much of that evidence now. Among the questions hopefully to be answered: Will people use the cushion of
free money to look for better work? Will they go back to school for retraining? Will neurological
development of children improve? Will crime rates go down?
As with many ideas with diverse support at high levels, the particulars of execution can make or break UBI
in practice. Take the recent, much heralded UBI experiment in Finland. A Finnish welfare agency, Kela, and
a group of researchers proposed paying between 550 and 700 euros a month to both workers and
nonworkers around that country. Finland’s conservative government then began tweaking the proposal,
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most importantly eliminating the part of the plan that paid people who had jobs, and only providing UBI for
those receiving unemployment benefits instead. It had no interest in whether UBI would allow people to
look for better jobs or to train themselves for the jobs of the future. The government declared that the
“primary goal of the basic income experiment is related to promoting employment.” And so what started
as a credible experiment in empowering labor and liberal values became a conservative program to get
more people to go back to crappy jobs—and a great warning about the impact that politics can have on
efforts to test or deploy UBI. (We must wait until 2019 to see the full extent of the outcome.)
Chris Hughes, a cofounder of Facebook and not-quite-billionaire, is the person I found with a plan for UBI
that’s halfway between Silicon Valley’s techno-utopian vision and the vision held by the liberal East Coast
types that I mostly hang out with these days.
His new book Fair Shot: Rethinking Inequality and How We Earn outlines his views on UBI, but here’s my
brief version of what Hughes is thinking: He believes we can do UBI now. He says we can “provide every
single American stability through cash” by providing a monthly $500 supplement to lower-middle income
taxpayers through the Earned Income Tax Credit, or EITC. He would expand EITC to include child care,
elder care, and education as types of work that would be eligible for EITC. (Currently if the jobs are unpaid
jobs, they are not eligible.) Hughes contends that this would cut poverty in America by half. According to
his numbers, right now the EITC costs the US $70 billion a year, and his UBI proposal would tack on an
additional$290 billion. Citing research by Emmanuel Saez and Gabriel Zucman showing that less than 1
percent of Americans control as much wealth as 90 percent of Americans, Hughes' plan to pay for that
expansion involves increasing the income tax for the top 1 percent, or people earning more than $250,000
a year, to 50 percent from 35 percent, and treating capital gains as income—moving long-term capital
gains from 20 percent to 50 percent, hitting the wealthiest the hardest.
He’s putting his money where his mouth is too, underwriting a project that will give $500 a month to
residents of Stockton, California.
Will UBI save America? Our Congress and president just passed a tax law that reduces taxes on the
country’s wealthiest, but I still think Hughes' proposal is reasonable in part because EITC is a pretty
popular program. My fear is that the current political climate and our ability to discuss things rationally are
severely impaired, and that's without factoring in the usual challenges of turning rational ideas into law. In
the meantime, it’s great that Silicon Valley billionaires have recognized the potential negative impact of
their businesses and are looking at and funding experiments to provide better evidence-based
understanding of UBI, even if evidence appears to have less and less currency in today’s world.
Am I optimistic? No. Should we get cracking on trying everything we can, and is UBI a decent shot on
goal? Yes and yes.
This work is licensed under a Creative Commons Attribution 4.0 International License.
... We can choose a purely technocratic approachone that sees each of us as a set of financial and material needs to be satisfied-and simply transfer enough cash to all people so that they don't starve or go homeless. In fact, this notion of universal basic income (UBI) seems to be becoming more and more popular these days (Ito 2018). But in making that choice I believe we would both devalue our own humanity and miss out on an unparalleled opportunity. ...
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The positive coexistence of humans and AI is possible and needs to be designed as a system that provides for all members of society, but one that also uses the wealth generated by AI to build a society that is more compassionate, loving, and ultimately human. It is incumbent on us to use the economic abundance of the AI age to foster the values of volunteers who devote their time and energy toward making their communities more caring. As a practical measure, to protect against AI/robotics’ labor saving and job displacement effects, a “social investment stipend” should be explored. The stipend would be given to those who invest their time and energy in those activities that promote a kind, compassionate, and creative society, i.e., care work, community service, and education. It would put the economic bounty generated by AI to work in building a better society, rather than just numbing the pain of AI-induced job losses.
... In Latin America, increases in spending on cash transfers rose at a higher rate than spending on education, healthcare and housing between 1990 and 2009 (Lavinas, 2013). Critics of the Government of India's proposal for a universal basic income grant claim it will be targeted and financed by cutting back on public services and subsidies ( Gosh, 2017;Khera, 2016). This is antithetical to the idea of a universal income, but it does highlight how this policy may be used to weaken the public services that poorer women workers rely on. ...
Article
There has been increasing recognition of the growth of informal employment in the global South and North. Most informal work is precarious and low paid, with workers having little or no access to social protection. It is sometimes suggested that an approach that moves away from productivism – the idea of work as a pathway to access social protection – and towards a universal human rights-based approach is important. However, this article argues that a large and growing informal economy does not provide justification for abandoning certain key productivist ideas. Key ideas that should not be abandoned include the focus that this approach has on establishing a link between workers and capital and the importance of social services within a social protection discourse that is presently dominated by cash grants. Also important, productivist ideas emphasize the economic contributions of informal workers as a means by which to complement a human rights-based argument for the extension of workplace protection to all workers, regardless of employment status. Overall, the hard binary that is sometimes drawn between human rights-based approaches and productivist (or “instrumentalist”) arguments may not always be as definitively delineated as some might suggest.
... In Latin America, increases in spending on cash transfers rose at a higher rate than spending on education, healthcare and housing between 1990 and 2009 (Lavinas, 2013). Critics of the Government of India's proposal for a universal basic income grant claim it will be targeted and financed by cutting back on public services and subsidies (Gosh, 2017;Khera, 2016). This is antithetical to the idea of a universal income, but it does highlight how this policy may be used to weaken the public services that poorer women workers rely on. ...
Article
There has been increasing recognition of the growth of informal employment in the global South and North. Most informal work is precarious and low paid, with workers having little or no access to social protection. It is sometimes suggested that an approach that moves away from productivism – the idea of work as a pathway to access social protection – and towards a universal human rights-based approach is important. However, this article argues that a large and growing informal economy does not provide justification for abandoning certain key productivist ideas. Key ideas that should not be abandoned include the focus that this approach has on establishing a link between workers and capital and the importance of social services within a social protection discourse that is presently dominated by cash grants. Also important, productivist ideas emphasize the economic contributions of informal workers as a means by which to complement a human rights-based argument for the extension of workplace protection to all workers, regardless of employment status. Overall, the hard binary that is sometimes drawn between human rights-based approaches and productivist (or “instrumentalist”) arguments may not always be as definitively delineated as some might suggest.
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