Tuesday, 3 April 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 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 Associationthat 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.
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, 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.
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