Imagine Getting $1,000 a Month from the Government…

 

UBI Image

…for the rest of your life with no strings attached. This is at the heart of the Universal Basic Income (UBI), an idea endorsed by Andy Stern and, in a number of variations, by a set of strange bedfellows: revolutionary war activist Thomas Paine, the founder of economics Adam Smith, President Richard Nixon, civil rights icon Martin Luther King, conservative economists Frederick Hayek and Milton Friedman, consumer activist Ralph and progressive policy columnist Robert Reich.

It’s an idea that is being tried on an experimental basis in Holland and Finland, and was recently a narrowly-defeated referendum in Switzerland. It has a modest model in the Alaska Permanent Fund which gives every citizen of the state roughly $2,000 as a result of profits from oil operations in the state. While the time might not now be ripe for consideration and implementation in the United States, Andy Stern, author of Raising the Floor, thinks that we should begin talking about it a part of contingency planning for the future, a future that he sees will be much different in terms of jobs and employment as it is today. A future that may require a radical shift in the social contract.

First the Solution (which Stern lays out in the last chapter of the book):

The advantages from Stern’s point of view the UBI will:

  • provide greater freedom to choose and greater economic security than modern America currently offers to an anxious population. It will be friendly to entrepreneurship and lead to greater mobility because people will be able to take risks in relocation.
  • be an effective means for combating poverty, enabling the currently marginalized to have basic needs satisfied and to find the dignity and opportunity that the freedom from want provides.
  • be a spur to the economy as many Americans, especially those in the lower income strata, will have more money to spend on consumer goods. Every dollar given out, when circulated in the economy creates $1.30 in value (though the return on investment is less when given to the well-to-do).
  • lead to a new sense of citizenship providing Americans with a sense of being stakeholders in society. A new and healthier social contract is forged, one that would marry government protection and civic responsibility.
  • decenter work as the primary source of identity and value in the lives of many Americans and enable many to re-evaluate their pursuit of  more and more consumer products through unenjoyable and time-consuming work.
  • help address the growing inequality that has numerous ill-effects on society, especially in areas of individual health and trust in government.

Stern is quick to point out that this proposal is not anti-work. If implemented, it will not stifle ambition, nor will it created to widespread indolence and parasitism. The poor will not be stigmatized as welfare  exploiters and those seeking greater life balance that the UBI might provide will find it easier to design lifestyle that makes sense to them. Those who want to live in the penthouse rather than on the first floor will still be able to do so.

The cost of such a program is not cheap. He estimates the costs between $1.75 trillion and $2.5 trillion. But he shows how the richest nation in the world may be able to afford it. There are a number of sources of revenue:

  • The elimination of most if not all poverty programs (like Food Stamps) accounts for 1/3 of the revenue. There are currently 126 federal and state welfare programs that run a tab of $1 trillion per yer.
  • Greater taxes on the rich (especially if a wealth tax is added to the income tax) – an idea that most Americans approve of. He likes to think that the rich might accept if they see that the alternative is the guillotines pushed by the mob up to the front gate of their mansions.
  • Reductions in subsidies for agriculture and the energy and the closing of other tax loopholes.
  • Driving down the cost of health care or at least slowing the rate of increase.

In short, the UBI is “simple to administer, treats all equally, rewards work and entrepreneurship, and trusts the poor to make the decisions about what to do with their money.”

Stern is very receptive to variations: a $4,000 a year payment to children under 18; a large payment – say $40,000 to those reaching their 18th birthday; adjustments that recognize regional cost of living differences; ome kind of means testing that would deny a transfer to the upper 10%.

What’s the Problem? (which Stern defines in the first ¾ of the book)

Stern was the dynamic head of SEIU (The Service Employees International Union) which organized hospital staff, nurses, home health care providers, and security guards. He left the position five years ago to look deeply into the future of employment in the United States. What he discovered by interviewing tech innovators, Silicon Valley entrepreneurs, investment bankers, community organizers, labor historians, university-based sociologists, and futurologists was an economy undergoing radical transformation through major disruptions caused by technological and social changes.

What he found was alarming, especially since he was unafraid to inquire about the “worst-case scenario” as well as the “best case scenario.” A pessimistic forecast, but one that we should nevertheless prepare for, is not a world with full employment but rather a world in which persistent unemployment might be in the 30% to 40% range. Were this to be the case, how does a society remain stable, secure, and productive? The UBI is a major part of Stern’s answer. It may be an “oddball” proposal now but in 20 or 30 years it may be the best remedy that we have at our disposal.

Stern’s glass-half-empty view of the future is primarily due to the projections of further disruptions caused in employment through technology. More and more jobs will be replaced by automation and more parts of jobs will also be shifted to machines. While the book was published before Donald Trump, promising to Make America Great Again by bringing back jobs, emerged as a presidential candidate, Stern would certainly repudiate Trumps optimism. He would point out that many more jobs were lost, and will continue to be lost, due to automation, rather than because of outsources to low-wage workers in foreign countries. And some jobs, like those in the coal industry, are never coming back. Though hardly as extravagant in her promises, Hillary Clinton probably oversold her ability to create well-paying, enduring jobs that are pathways to secure retirement.

Stern’s gaze into the crystal ball is informed by the transformations that have taken place in the workplace over the last two or more decades, changes that have produced a general state of anxiety and partially explain the election of Trump who understood these anxieties, offered simple bromides, and posed as the one-man solution to the financial woes.

Robots have had a might impact on industrial planets, replacing blue collar workers by the thousands, but they have entered the white collar workplace – serving as medical diagnosticians and financial counselors – and low-wage jobs – serving as hamburger makers and big box store greeters.

Online purchasing – though still a relatively small part of overall consumer sales in the nation  – has eliminated thousands of store clerks and cashiers.   [See my blog on The Revenge of the Analog for some discussion of the resistance to such changes.]

There has been a profound shift, according to Sterns, in the employer-employee relationship and in the connection between job and work, some of which but not all is attributable to the software revolution. The age of the employer lifetime commitment is longer over. Many of the jobs today are what might be called “contingent” work, that is freelance arrangements between a person with a marketable skill and an employer who needs temporary help. By some estimates 34% of the work force are independent contractors or moonlighters. Temp employees are nurse practitioners, substitute teachers or adjunct faculty, oil-well drillers, or members of a specialized consulting team called in for a quick fix. Kelly Services, which has expanded far beyond the role of providing office personnel, is looked upon by its CEO as the HR department for contingent workers.

Many of the contingent workers are also underemployed, not simply by the fact that they work fewer than 37 hours a week, but also because there is a mismatch between their educational preparation and the challenges of the jobs that they do. Not surprisingly from Stern’s point of view, the faith that a college education will lead to a good job is fraying; many parents are questioning the return of investment and are advising their children to pursue lines of work not requiring a degree, their pursuit funded in part by their unspent college tuition.

Despite the emphasis on STEM education and the rush of students into these disciplines, Stern states that the supply of graduates in science is already exceeding the supply, as it has in certain professions like law and university teaching.

Colleges would be on firmer ground if they claimed that an education is valuable not as a path to a certain career and prosperity but rather as a place to find oneself and develop an identity. There is some evidence that a significant proportion of the millennial population rejects employment that turns them into wage slaves and that interferes with their personal freedom and flexibility. They’re reasonably comfortable with a gig economy, or at least know how to negotiate within it.

If this is now and will continue to be the nature of work and national employment, then the UBI is a necessary antidote to employment anxiety. It’s a big step in the direction of providing health insurance, security, a retirement funding for all citizens.

Furthermore, Stern sees no quick reversal in the decades long trend of increasing inequality that manifests itself in a two-tiered workforce: highly skilled and well-compensated knowledge workers, money manipulators, and athletes-entertainers and poorly compensated workers in the service industries. The UBI is a way to ameliorate these differences.

Stern places himself in the camp of the radical pessimists, and in opposition to the sunnier mitigators. While he affirms the short term fixes of the mitigators, he questions the degree to which they solve he believes are long term problems. So let the policy writers endorse an increase in the minimum wage or infrastructure spending or a reduction in the number of workplace hours per week or the continuation of the earned income tax credit (which doesn’t apply if you are out of work); these will produce incremental improvements. So let the politicians endorse education as the most reliable means to self-improvement, but let them also be aware the pot of jobs at the end of the rainbow, might be only partly filled. The existence of the radical UBI may effectively counter the reality today that if you are born poor in the United States you are likely to remain poor.

One question that Stern does not address is the impact of the UBI on price-setting. Would a producer of goods or services to the middle class (whose median family income in2016 was 56,000) set prices higher knowing that the family new income is $80,000 (or $88,000 if you include $4,000 for each child)? And I’m sure that there are other questions that will be raised by economists and others far savvier than I.

Given the fractious debate about the design and implementation and now repeal of the Affordable Care Act, perhaps Stern has overestimated the degree to which folks from across the political continuum will coalesce around his big idea. He’s right to avoid pushing now for implementation. Such legislation would be stigmatized as socialistic and a casting aside of the virtues that made America great. But he has served us well by putting the idea on the table and pledging to nurture it until the time is right for the picking.

 

 

 

 

 

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About Dr. Michael Cunningham

Dr. Michael Cunningham is Professor Emeritus in English.

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