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With artificial intelligence looming, debate over 'basic income' heats up

Academics, political leaders ask whether universal income programs could bring an end to poverty

Juliana Bidadanure, faculty director of the Stanford Basic Income Lab, right, speaks with Program Manager Sarah Berger Hernandez, left, at the lab in January. The Lab studies the real and potential impacts of basic income programs. Photo by Veronica Weber.

When Canadian researchers Evelyn Forget and Marni Brownell speak at Stanford University next Tuesday, May 21, they'll be wading into a debate over one of the most radical socio-economic experiments to date — universal basic income.

Universal basic income is a program by which people are given cash, either monthly or annually and typically by the government, to spend as they wish. Embraced by Rev. Martin Luther King Jr., economist Milton Friedman, numerous tech titans including Facebook's Mark Zuckerberg and Tesla's Elon Musk, the idea of providing a guaranteed basic income to all is proposed as a way to help people rise out of poverty or keep from sliding into it.

Basic-income programs could help people pay off debts, obtain job-skills training, further their educational aspirations, afford housing, start a business or get through a health crisis, proponents say.

But others argue that a guaranteed basic income would be prohibitively expensive, de-incentivize people from working and actually cause more poverty by taking away funding for existing safety-net programs.

That tension surrounding universal-basic income can be felt at Stanford, where the topic is hotly debated, with lectures provocatively titled "Basic Income Illusions"; "Basic Income: A Radical Proposal for a Free Society and a Sane Economy"; and "Why Is Universal Basic Income So Controversial?"

For many proponents, the concept, which has been considered for more than 500 years, is an idea whose time has come. Millions of jobs in a multitude of industries are already being phased out by technology, robotics, radical new business models and artificial intelligence.

Approximately 25% of U.S. employment — 36 million jobs in 2016 — are at high risk of becoming automated in the coming decades, according to a January 2019 Brookings Metropolitan Policy Program report. Another 36% of U.S. jobs are at medium risk of becoming automated by 2030 — 52 million jobs in 2016 numbers. Most are lower-paying jobs in areas such as office administration, production, transportation and food preparation.

Closer to home, in Santa Clara and San Mateo counties, 40% and 43%, respectively, of tasks could be automated, the Brookings report notes.

Academics, business leaders and policymakers have been exploring how to prepare society for the expected job losses, which they fear could result in increased socioeconomic inequality and civil unrest.

Institutions such as the Stanford Basic Income Lab and Palo Alto-based Institute for the Future have been studying and taking positions on universal basic income.

Juliana Bidadanure, founder and faculty director of the Stanford Basic Income Lab, said public discourse about universal basic income has increased extensively in the last 20 years. Often, it has been raised as a potential remedy to job displacement and income inequality caused by artificial intelligence but is also related to gender inequality, since women often do jobs that are poorly paid or aren't paid at all, such as caregiving.

"What is exciting about universal basic income is that it forces us to think hard about what we owe each other," Bidadanure said.

The Basic Income Lab, founded in 2017, promotes research on the development and effects of universal basic income and brings together scholars, policymakers, business leaders and others to discuss and learn about the politics, economics and potential best practices of universal basic income.

Meanwhile, the Central Valley city of Stockton, one of the state's 20 largest municipalities, is putting theory into practice, having kicked off a $1 million basic-income experiment in February. The Stockton Economic Empowerment Demonstration (SEED) project pays 130 individuals in households earning less than the city's median income of $45,000. The selections were made randomly. Each recipient receives $500 a month for 18 months. The city also has a control group that won't receive any cash, Stockton Mayor Michael Tubbs said.

The Stockton pilot program is funded by the nonprofit organization the Economic Security Project, co-chaired by former Facebook executive Chris Hughes, a proponent of universal basic income, who authored the book "Fair Shot: Rethinking Inequality and How We Earn." (Bidadanure is also on the steering committee of the Economic Security Project.)

Researchers for the Stockton program are studying changes in the recipients' financial security, sense of control, civic engagement and health and wellness. A public website will allow people to share their views with policy makers on basic income in Stockton and the country.

At its heart, proponents say, universal basic income calls for a shift in how society thinks — away from a tiered socioeconomic hierarchy of "rich versus poor" and "us versus them" to a "we" economy.

Natalie Foster, co-chair of the Economic Security Project, and former CEO and co-founder of Rebuild the Dream, a social-justice accelerator, said that wages have been stagnant for decades, leaving most people in America without the ability to rise economically.

"The size of the solution needs to match the size of the problem. The problem is dire, as we see in California every day. Solutions have been incremental," she said.

The Stockton experiment

The Economic Security Project, which was founded with the belief that universal basic income could alleviate poverty and increase the ranks of the middle class, was in search of cities to partner with when Foster met Stockton's Tubbs.

Tubbs said he learned about universal basic income while studying Rev. Martin Luther King Jr. as a student at Stanford. In Tubbs, Foster said she knew she had the right person to implement a city-based universal basic income, the first city-run program in the country.

With a population of 320,000, Stockton has seen its share of ups and downs. In the 2000s, the city experienced rapid growth when rising Bay Area housing prices prompted people to move to the more-affordable city, boosting the population by 17%. As a result, the city's median housing value more than tripled, from $110,000 to $400,000 between 2000 and 2006, according to United States Common Sense, a nonpartisan nonprofit policy group started at Stanford University.

In February 2012, the city filed for bankruptcy, due in large part to years of alleged mismanagement and rising government-employee-benefits impacts, according to the Common Sense paper.

By 2018, however, Stockton's fortunes had changed. It soared to the second most fiscally sound municipality in the nation among the country's most populous cities, based on debt or surplus per capita, according to Truth in Accounting, a nonprofit group that tracks state and local financial practices.

But Stockton's poorest are still experiencing a crisis, Tubbs said.

"We had the fastest rising rent in the country last year. It's put a huge pressure on housing and cost-of-living increases," he said, noting the per capita income is $22,000.

"Many people are working two to three jobs; 23% live in poverty. They're failing to afford basic necessities like housing, utilities, transportation and child care," he said.

Two months into the program, Tubbs said he is hearing anecdotally that people are using the $500 a month to pay down their credit card debt, pay for transportation or pay overdue electric bills.

Currently, the city has no plans for how it would pay for a guaranteed income in the future if the program is found to be beneficial. That's a major concern of those who question universal basic income, who say expanding such programs — and having the government pay for it — would be prohibitively expensive.

Debra Satz, Stanford's Vernon R. and Lysbeth Warren Anderson dean of the School of Humanities and Sciences and a professor of philosophy as well as ethics, told the Weekly she is skeptical about the amount of basic income that would be required to reduce poverty substantively.

People would need to be given large-enough sums of money that would be meaningful. The U.S. poverty line for a single individual is just over $12,000 per year. It's about $26,000 for a family of four, she noted, so a cash payment of a few hundred or a few thousand dollars wouldn't change people's lives.

"Numbers really matter. Paying for (basic income) is going to have to be at a very high level," she said. "So how would that work?" (Learn more in "The $3.8 trillion question.")

Magical thinking or potential solution?

Rather than a guaranteed basic income, Satz favors a conditional subsidy that requires some sort of participation in society.

"Granting basic income that isn't conditioned at all on the willingness to contribute (to society) potentially undermines the ideal of reciprocity that lies behind the welfare state," she said during a panel discussion in January titled "Basic Income Illusions," which was hosted by the Stanford Basic Income Lab and the McCoy Family Center for Ethics in Society.

For Satz, the definition of participation would be broad and go beyond the current concept of work. It would include volunteer work, job training, elder and child care and other contributions to society that do not show up in a market economy.

Beyond that, Satz thinks that cash transfers are only one part of a broader toolbox to create a more egalitarian society, which requires tools other than empowering the individual.

"Cash is a means to satisfy the strongest individual preferences people have, no matter what they are. Achieving public goods takes coordination. Take the good of disability accommodation. If we give each person needing a wheelchair a check for $1,000, that doesn't ensure that accessible public spaces will be built.

"We should grant higher priority to support certain goods like education and health care over other kinds of goods like surfing opportunities, to use a famous example, even if some individual would prefer surfing to schooling and health care," she said.

"A well-funded universal basic income, at a high level, runs the risk of diverting desperately needed resources to improve the quality of public goods by spreading them like peanut butter over millions of different uses. And that, to me, is not as efficient and as powerful a way of attacking problems like bad housing, segregation, bad schools," she said during the January discussion.

Satz is also skeptical of the ability of universal basic income to transform communities.

"You walk around Stockton and you think: 'Look, the solution of giving everyone $5,000 (per year)? That's not what Stockton needs. Stockton needs major investment in infrastructure, schools and job training programs,'" she said.

Tubbs, however, disagrees that Stockton is facing an either/or choice.

"This shouldn't just be about addressing infrastructure needs. We need both — and people are at the heart of it all," he said.

In an email, he cited the city's recent efforts to boost infrastructure investment: mounting Measure M, a special tax dedicated to recreation and library programs, services and facilities; creating Opportunity Zones as a means for future investment in housing and industrial development, business and workforce; and talking with the California State University, Stanislaus' Stockton campus to spur more development.

"But, while we're making all these long-term infrastructure investments as we speak, we shouldn't wait to invest in our people. It isn't about giving handouts, especially in a society where one out of two Americans can't afford a $400 emergency. It's about finding solutions to some of our most pressing economic issues," Tubbs said.

"A guaranteed income isn't an answer to the issue of public investment in infrastructure nor is it a solution to all of society's ills."

Bidadanure agreed. A single policy cannot tackle all of the social and economic challenges that workers face, but universal basic income might address some of them, she said.

There is a growing body of evidence that a guaranteed income makes a positive difference in people's lives, she said. Several studies found that people don't squander their cash payments and people didn't work appreciably fewer hours. Some women who did work less, researchers found, used the time off to care for their families, she said.

Canadian researchers Brownell, associate director of research and a senior research scientist at the Manitoba Centre for Health Policy, and Forget, an economics professor at the University of Manitoba, have studied the health impacts of giving people unconditional cash payments.

Forget's 2011 analysis of Canada's 1975-1978 "Mincome" experiment (short for "minimum income") found that those who took the time off did so in beneficial ways, such as returning to school. Twelfth-grade high school enrollment increased in Dauphin, one of the three sites included in the study, from about 83% to 100% but dropped back to 83%-85% after the income payments ended.

Mothers also reportedly took more time off around childbirth by using their stipends for longer parental leave.

Forget also found that hospitalizations decreased 8.5% during the basic-income pay period, with hospitalizations for mental health issues and for accidents and injuries — which are often related to poverty in population health analyses — being the most significant drops, she noted.

Researchers have also studied the outcomes of a United States income program: Alaska's Permanent Fund. Since 1982, Alaska has paid dividends to its residents from the state's oil revenues. The amount of the annual cash payment, contingent on revenues, varies from year to year. At its peak, residents received $2,072 per person or $8,228 for a family of four annually. In October 2018, each resident received $1,600.

The fund has grown to $52.8 billion in the last 35 years.

The payments have helped keep 2% to 3% of the state population out of poverty each year since 1990, according to a 2016 report from the Institute of Social and Economic Research in Alaska. A 2018 study by Damon Jones of the University of Chicago and Ioana Marinescu of the University of Pennsylvania found the dividend has had no significant effect on overall employment rates, but the share of people who were employed part-time increased by 1.8%.

A 2017 phone survey of 1,004 Alaskan voters commissioned by the Economic Security Project found that 40% of respondents said the annual dividends made a "great deal" or "quite a bit" of difference in their lives during the prior five years. Another 39% said the dividends made a "fair amount" or only "some" difference. About 20% said the funds made "just a little" or "no difference" to them.

The survey found that 30% of respondents said they used the money to pay off debts; 27% said they saved all or most of the money; 24% spent all of the money and 15% spent half and saved half.

Seventy-eight percent of those surveyed had positive feelings toward the Alaska Permanent Fund. Respondents who viewed the program negatively — about 7%, which doesn't include the 15% who were "neutral or unsure" — said they thought the money could be put to better use, believed it should not be treated as an entitlement, had doubts about the fund's longevity or believed the fund to be susceptible to political manipulation.

The political question

Tubbs said he believes the biggest hurdle to widespread universal basic income wouldn't be financial so much as political.

In his own city, not everyone in the community liked the concept, but most didn't object because the proposal didn't use taxpayer dollars, he said.

"It sparked a good conversation about our values as a community. We started with the premise that as a country our economy isn't working for half the people. We have to be bold. We believe that people should be given the necessities to live."

Data indicates it might not be an easy sell. During a March 13 lecture at Stanford, Alan Krueger, the late Princeton University economist and former chairman of former President Barack Obama's Council of Economic Advisers, said his research shows that 33% of respondents to a survey supported the idea of universal basic income for all Americans and 42.1% were opposed.

But Foster noted that the country has instituted radical ideas related to income before that are now popular and ingrained.

"Social Security is a great example of a radical idea," she said. It started as a small payroll tax, and as it became clear that people used it and wanted it, it was increased.

Zuckerberg, a Palo Alto resident, advocated for a new socio-economic ethic during a 2017 commencement speech he gave at Harvard University.

"Every generation expands its definition of equality. Previous generations fought for the vote, civil rights. We have the New Deal and Great Society. Now it's time for our generation to define a new social contract. We should have a society that measures progress, not just by economic metrics like GDP, but by how many of us have a role we find meaningful.

"Giving everyone the freedom to pursue purpose isn't going to be free. People like me should pay for it, and a lot of you are going to do really well and you should too," he said.

The Institute for the Future in Palo Alto issued a manifesto a few years ago for an even more expanded concept — what it terms "universal basic assets" — to create a more equitable world. Rather than simply giving people cash, the universal basic assets model calls for equal access to things such as housing, personal wealth, education and other assets that enable people to grow and thrive. Already public assets, such as health care, transportation infrastructure and other resources, would need to become more equally accessible.

In a 2017 opinion piece for the business news publication Quartz, Institute Executive Director Marina Gorbis wrote that while universal basic income in the form of money can be invested in assets such as education, health and training, the proposals don't address the root causes of inequality.

As more jobs become obsolete because of advancing technology and artificial intelligence, economic returns will increasingly go to the investors and owners of these technologies instead of workers. So policies and new ownership models, such as employee stock-owned companies and cooperatives, are needed so that capital flows to all segments of the society and not just to a few.

But she also noted that the point of universal basic assets wouldn't be to engage in collectivism or to seize and redistribute wealth and assets. Instead, creating these vehicles for wealth distribution would help people survive in a rapidly shifting economy.

Related content:

Three questions about basic income

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Comments

4 people like this
Posted by Paul C.
a resident of Midtown
on May 17, 2019 at 12:50 pm

Here is a very good session of UBI number crunching and a rational debate.

Web Link

Freedom Dividend Fund (FDF) - This is a new term I imaged - a fund from people who do not need the UBI but will anyway get it, they can pick and contribute to some radically New Job Creation Ventures and see how their venture at work.

UBI experiment is fun to watch how people spend it - Create a hashtag such as #Freedom and people can be encouraged to post videos, pictures, or simply tweets of their ideas of how they will usefully spend their monthly Freedom Dividend. This needs to seeded with a dozen examples and stay organized to make it enjoyable to check out frequently.


8 people like this
Posted by The Concept Works!
a resident of Menlo Park
on May 17, 2019 at 1:01 pm

In Sweden, a guaranteed basic income, government health care benefits and mandatory paid 25 day vacation periods works wonders.

We will returning to Stockholm ASAP. Living in America is a DRAG.


Like this comment
Posted by gare-n-teed!
a resident of Greenmeadow
on May 17, 2019 at 1:04 pm

UBI?

Ask the socialists up in Alaska.


4 people like this
Posted by Le plus ça change...
a resident of Another Palo Alto neighborhood
on May 17, 2019 at 2:38 pm

This is a tough conversation to engage in, because if I could just (within the time and resources of an ordinary person in a way that doesn't interfere with life) enforce the existing contracts I have had throughout life, with banks, insurance companies in the event of major casualties and major health problems, technology companies, financial services companies, lawyers, telecom companies, car and other consumer goods companies, etc etc, I would be millions richer today. I could create a whole reality TV show around it. Your money or your life? A whole bunch of people in Northern CA disasters are about to learn all about the guardrails they paid money for that aren't really bolted down.

I remember listening to a radio show in which someone wealthy spoke about learning of a group of poor women who were not getting the benefit of having their paychecks put into banks and at least earn the interest -- completely oblivious to the advantage those women were creating for themselves of not having their wages stolen unpredictably through ever changing fines fees and other forms of financial predation from the goliaths of this country.

It's also hard to hear about all the jobs that are going to be obsoleted by AI when I limp along unable to use my technology the way I need it because goliaths like Apple deliberately obsolete them to sell more and pay absolutely no attention whatsoever to serving me better for all that money I shell out.

The situation is highly analogous to that movie with Bradley Cooper - Limitless - in which people take a drug that makes them superpowerful and better in every way for just awhile, and then it wears off and they spend all their time and focus trying to get that back and get more doses, but they are only ever a shell of what they were and would have been better had they had never used it and had not become dependent on it in the first place. (Where the analogy falls apart in today's world is that it's really not a choice like a drug in a movie.)

Instead of the Six Million Dollar Man model where we get stronger, faster, etc from technology, we get the Limitless or Terminator model. Just because we can do something, doesn't mean we SHOULD.

I would much rather see government supporting opportunity, proper regulations, and making it easier for people to lead their lives by creating opportunity (like education and healthcare), easily enforced regulations, and self-enforcing laws (in which ordinary people can leverage the right thing at the point of every interaction).

An example of self-enforcing laws, in the '70s our society was suffering from predatory mail order -- companies would send people unsolicited merchandise and then if it wasn't returned fast enough, they would proceed to collections. Lots of people paid just to make it go away. It became a huge problem. Everyone was affected, even members of Congress took it up because they were hit. Such a scheme not only shakes people down for money, it's aggravation, stress, loss of time and control in people's lives. When hit by more and more of it, it could destroy whole families.

When Congress took it up, companies claimed it would hurt the economy, jobs, etc, if it were stopped or regulated. Congress could have made regulatory laws trying to differentiate the good actors from the bad ones, or made rules about how long people have to return things, what recourse they have in court, etc. Instead, very late in the process, someone had the brilliant idea of making it so that if someone sends you something you didn't overtly ask for, then it is yours to keep. It stopped the whole thing overnight, and it not only didn't hurt the economy, it redeemed mail order as a respected sector of our economy since then. Rules that put the time and autonomy of ordinary human beings FIRST ended up being good for the economy, and they were certainly good for ordinary people.

An upgrade that causes me lost time and that damages my personal productivity and workflow and makes my device function worse or essentially bricks it isn't an upgrade. That's false advertising, unethical, shoddy... I and everyone else should have easy recourse against a company that does that, so they are never tempted to do anything called an "upgrade" that isn't really, the very first time it happens. Such a situation could only be in an economic world in which the laws respect my time and autonomy as a human being and these are protected above the interests of the predatory goliaths.

In short, why isn't anyone thinking of AI that works for individuals (rather than shelling out some dough that someone will quickly figure out how to cheat most of them of)? Why isn't anyone thinking of AI that catches and sets straight these kinds of injustices before they can affect lots of people? The Internet came about because of a government project. Hoover dam, ditto. Going to the moon. The Interstate highway system, the ports, the airports, our public health system, etc etc etc. My health insurance company uses AI now to settle insurance claims, and as a result, after more than a dozen phone calls and letters, I have just received $85 for an undisputed claim from four years ago. That's just one of MANY. Why isn't the AI being developed to PREVENT that kind of thing from happening to people (and no, I do not have a right to sue, millions of people in this country are not, by law, protected by state insurance laws).

It seems to me that people on the left would do better, instead of serving up a warmed up version of Communism, to go after the unproven economic ideas from the right that have resulted, rather predictably, in this very imbalanced economic situation and the loss of power and wealth and autonomy among everyone on the bottom.

This extreme inequality was always going to be the result, and if it is NOT dealt with, it always ends in violence and extremism (which those at the top NEVER see coming). What we got from advantaging people with power is plutocracy, which is kind of like monarchy but without the noblesse oblige. You can have good economies with strong en leaders and monarchies, but what you can't have is democracy that works for everyone. (It has been painful to watch the last 30 years of the powerful on the Right manipulating The People to hate and give way the source of their own power, their government of by and for the people.)

Strengthen the power of and the rights of people. Strengthen opportunity and vibrancy of our democracy. Those on the right would do well to heed the lessons of the past and support it, because the rise of the extreme left (which we haven't seen yet, this is NOT it) is inevitable in answer to the extreme right we've seen arise from the whole plutocracy/permanent Republican-majority (i.e. anti-democracy movement to destroy the marketplace of ideas)/teaparty/laissez-faire economic scam. (I can say that because Reagan's own budget director admitted the whole thing was a scam made up in order to cut top tax rates.) Where are the people on the left willing to go after those damaging ideas and restore healthy balance in our democracy? Again, warmed over Communism is like demanding affordable housing in an area with too many jobs for the infrastructure, when it's a lot easier and beneficial to incentivize and invest in better distributing the job centers throughout the state -- it sounds good but the devil is in the details.




3 people like this
Posted by Me 2
a resident of Old Palo Alto
on May 18, 2019 at 9:14 am

UBI is basically what SF had before Care Not Cash passed when Newsom was mayor.

Cash handouts didn't work in SF. All it did was cause a spike in ER visits twice a month and people driving in from Reno to get their handout. Why does anyone think it would work in a bigger scale?

Furthermore, it's just an injection of capital into the market. When there's more capital, there's more demand for everything, causing inflation. It's just like the easy student loans led to college tuition inflation.

It's all magical thinking.


5 people like this
Posted by john_alderman
a resident of Crescent Park
on May 18, 2019 at 9:39 am

john_alderman is a registered user.

@The Concept Works! - Sweden doesn't have, and has never had UBI. But enjoy your trip, it is beautiful country.


10 people like this
Posted by The Concept Works!
a resident of Menlo Park
on May 18, 2019 at 6:16 pm

> Sweden doesn't have, and has never had UBI.

It is currently on a referendum (as in Switzerland) but there is more income equality in Sweden than in the US.

Plus...most US companies are too cheap to allow 25 days vacation.


19 people like this
Posted by Le plus ça change
a resident of Another Palo Alto neighborhood
on May 18, 2019 at 7:03 pm

The minimum salary in Switzerland already exceeds $30/hr and is the result of strong unions negotiating them.


7 people like this
Posted by Mark Weiss
a resident of Downtown North
on May 19, 2019 at 2:16 pm

Mark Weiss is a registered user.

I’m waiting for the panel about uploading my consciousness into the cloud and thereby living long enough to see total Fascism in the former USA.
Or as Bill Withers said: use me, until you use me up.


2 people like this
Posted by Wsc
a resident of Menlo Park
on May 20, 2019 at 6:07 am

“De-incentivize?” What an appalling trashing of the English language.


3 people like this
Posted by george drysdale
a resident of Professorville
on May 20, 2019 at 9:21 am

Economics. Already the national debt is as high as just after the second world war. On paper the U.S. is already bankrupt with interest on the debt headed toward wiping out all other expenses. The basic cause the U.S. has twice the number of people already on the dole as other developed nations. It's in the numbers but the rhetoric sounds good. Welcome to California.

George Drysdale land economist


Like this comment
Posted by Ronnie
a resident of Woodside
on May 20, 2019 at 1:50 pm

"The basic cause the U.S. has..."

Cut taxes for billionaires too many times.

Bush took Clinton's budget surplus and ran a trillion dollar deficit.

Trump handed 2 trillion over to billionaires and corporations.

Get real, George.


6 people like this
Posted by sewuzy
a resident of Charleston Meadows
6 hours ago

WHY UNIVERSAL BASIC INCOME COSTS FAR LESS THAN YOU THINK

August 14, 2018 7.23am EDT
Author: Elizaveta Fouksman, Leverhulme Early Career Fellow, University of Oxford

Disclosure statement. Liz Fouksman receives funding from the Leverhulme Trust, and has been funded by the Berggruen Institute and the Ford Foundation.

Partners, University of Oxford. University of Oxford provides funding as a member of The Conversation UK.

Republish this article. Republish Republish our articles for free, online or in print, under Creative Commons license.
Web Link
The Cost of Basic Income: Back-of-the-Envelope ... - Works Bepress
Web Link

Want to get rid of poverty, lessen inequality and provide financial stability in a world of precarious work? Well, why not simply give everyone enough money to ensure basic sustenance?

This is the deceptively simple solution proposed by advocates of universal basic income (UBI). Just transfer enough money to everyone, every month, to guarantee a basic livelihood. The policy is universal and unconditional (you get it no matter who you are or what you do).

This means no bulky bureaucracy to administer the programme, or onerous reporting requirements on the poor. Nor do you have to wait to file paperwork to benefit: whether you lose your job, decide to strike out on a new career path or take time away from work to care for a family member, the money is already there.

But the UBI movement has a major problem: both critics and even many supporters don’t understand how much the programme would really cost. To calculate the cost, most people just multiply the size of the monthly income (say, $1,000) by the population (it’s universal, after all) and – voilà – a number that seems impossibly expensive.

But this is not how much UBI costs. The real cost – the amount of money that actually needs to be taken from someone and redistributed to someone else – is just a small fraction of these estimates.

The key to understanding the real cost of UBI is understanding the difference between the gross (or upfront) and net (or real) cost. Here’s a simple example: imagine a room with 15 people who want to set up a UBI for the room of $2 per person. The upfront cost of the policy would be $30. The ten richest people in the room are asked to contribute $3 each towards funding it. After they each put in $3, raising the total $30 needed, every person in the room gets their $2 universal basic income. But because the ten richest people in the room contributed $3, and then got $2 back as the UBI, their real, net contribution is in fact $1 each. So the real cost of the UBI is $10.

Estimates that just multiply the size of the UBI by the population of a country do the equivalent of claiming that the cost of UBI in the room above is a whopping $30. But the real cost in this scenario – the money redistributed from the wealthy – is only $10.

The billionaire’s dilemma
It’s important to understand who will be gaining money through a UBI and who will be contributing to it. The common mistake is to double count the net contributors. Yes, they get a UBI, but in contributing to the UBI pot they first return their UBI, and then throw in some money on top of that. So it’s incorrect to count them when calculating the true UBI cost.

This is a fundamental point that often gets missed: those that are taxed to pay for the UBI will get some of that cost back – by getting their UBI. You can also think about it in reverse: while the UBI goes to everyone, the rich in effect give it back in the first chunk of taxes they pay, so you don’t need to count their UBI in cost estimates.


Dilemma solved. OnInnovation/flickr, CC BY-ND
This also resolves UBI’s “billionaire’s dilemma” – why give someone like Bill Gates a basic income? The answer is that Gates would simply return that UBI through his taxes – and help pay for others. But if Gates becomes suddenly destitute, the UBI will still be showing up for him to use every month. And since his tax bill will drop, he’ll become a net beneficiary rather than contributor.

True costs
Any UBI estimate that just multiplies the size of the UBI by the population is a red flag that the cost has been over-inflated. A true cost estimate will always discuss who the net beneficiaries will be, who the net contributors will be, and the rate at which we gradually switch people over from being beneficiaries to being contributors as they get richer (this is sometimes called the claw-back rate, the withdrawal rate or the marginal tax rate – which is not an overall tax, but simply the rate at which people start to return their UBI to the communal pot as they earn more).

Cost estimates that consider the difference between upfront and real cost are a fraction of inflated gross cost estimates. For instance, economist and philosopher Karl Widerquist has shown that to fund a UBI of US$12,000 per adult and US$6,000 per child every year (while keeping all other spending the same) the US would have to raise an additional US$539 billion a year – less than 3% of its GDP. This is a small fraction of the figures that get thrown around of over US$3 trillion (the gross cost of this policy). Karl’s simplified scheme has people slowly start contributing back their UBI in taxes to the common pot as they earn, with net beneficiaries being anyone individually earning less than US$24,000 a year.

This point still holds if you’re raising money for UBI from other sources than income or wealth taxes. If you use a corporate or data tax, or a natural resource or carbon tax to finance a UBI, you are still redistributing money that would otherwise ultimately be profits that go to Google shareholders or BP executives. And you’re taking less away from them than you would think – because they too get a UBI. So the money they end up losing through the new tax is offset by the UBI they receive. The same holds if you’re paying for a UBI by reshuffling your budget.

Some people get confused and question whether UBI is really universal if only a portion of the population actually ends up with extra income, while another portion pays for it. But any policy that is universal yet redistributory works this way. Public transit, roads and schools are all universal benefits, but some people pay a lot for their funding through their taxes, while others enjoy them for free or at a lower cost.

In light of the huge benefits available from a UBI, it’s a waste of time to argue over wildly inflated cost estimates. The numbers are out there – we can pay for a basic income.

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Like this comment
Posted by gare-n-teed!
a resident of Greenmeadow
1 hour ago

>> The basic cause the U.S. has twice the number of people already on the dole as other developed nations.

George: your sources, please.

I keep hearing how we don't want to be a 'socialist' country like "dem durn eur-o-pens". According to you, we're 'worse' than them.

Any comments on Alaskan incomes? Seems quite popular. Is it just a fringe Alaskan Socialist Party?


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