Tuesday Sep 18

EXCERPT FROM The War on Normal People

Universal Basic Income

It’s hard to fathom now, but the idea of a guaranteed annual income was mainstream political wisdom in the United States in the late 1960s and early 1970s. Medicare and Medicaid had just been passed in 1965, and the country had an appetite for solutions for social problems. In May 1968, over 1,000 university economists signed a letter supporting a guaranteed annual income. In 1969, President Nixon proposed the Family Assistance Plan, which would provide cash benefits of about $10,000 per family and serve as a guaranteed annual income with some eligibility requirements; this bill was supported by 79 percent of respondents polled at the time. The Family Assistance Plan passed the House of Representatives by a wide margin—243 to 155—but then stalled in the Senate due to, of all things, Democrats who wanted an even more robust plan. A Democratic congressman, William Ryan from New York, instead proposed an income floor equivalent to $33,000 today, and the original bill would be argued and re-proposed for years thereafter.

The U.S. government funded a number of studies between 1968 and 1975 to gain insight into how guaranteed income would impact individual families. The primary agenda was to see whether people would keep working if they were getting money from the government with no strings attached. The New Jersey Graduated Work Incentive Experiment gave cash payments to more than 1,300 families between 1968 and 1971 to get above the poverty line. Researchers found minimal impact on work— men worked one hour less per week, while women reduced their work weeks by five hours. Mothers spent more time with their children, whose performance at school improved. High school graduation rates rose substantially over the period, by as much as 30 percent.

Similar studies were rolled out in North Carolina, Iowa, Indiana, Colorado, and Washington. Most of these studies showed results similar to the initial New Jersey population. However, the most rigorous and generous study in Denver and Seattle found work- hour decreases of about 9 percent for men, 20 percent for wives, and 14 percent for single mothers. The Denver study also showed an increase in marriage dissolution, which surprised a lot of people and helped arm opponents of the legislation, who defeated it for good in 1978. In 1988, scholars at the University of Wisconsin went through the data and found that the effect on marriage was dramatically overstated based on an erroneous model. Other scholars later questioned the work decrease as based on self-reported hours. But by that time, the debate had passed.

The U.S. studies involved individual families and never tried to measure communal impact. Canada tried it all in one small town. In February 1974, Canada spent the equivalent of $56 million to get everyone in the town of Dauphin, a 13,000-person town northwest of Winnipeg, above the poverty line. One thousand families got a check each month of different amounts with no restrictions. They called it “Mincome,” short for minimum income. It lasted for four years, before a conservative government won control of the government and discontinued payments.

Many years later, in 2005, Evelyn Forget, an economist at the University of Manitoba, tracked down and analyzed the results. “Politically, there was a concern that if you began a guaranteed annual income, people would stop working and start having large families,” recalls Forget. Instead, she found minimal effect on work. The only groups who worked substantially less were new mothers and teenagers, with the latter spending more time in school. Birth rates for women under 25 dropped. High school graduation rates went up. Perhaps most dramatically, Forget found that hospital visits went down 8.5 percent, with reductions in workplace injuries and emergency room visits. Domestic violence went down as did mental illness-related appointments and treatments. Basically, life got significantly better in a town without poverty.

It may be hard to believe, but one state in the United States has had something resembling a Universal Basic Income (UBI) for decades. In Alaska in 1976, the state started receiving billions in oil revenue from state-owned land. Governor Jay Hammond, a Republican, had an innovative plan—he pushed to place the revenue in a fund that would then pay out part of its earnings to state residents each year. He insisted that this fund had “a conservative political purpose” by putting a brake on government spending and distributing more of the money directly to people.

The Alaska Permanent Fund accrued earnings and started paying dividends in 1982. Each Alaskan now receives a petroleum dividend of between $1,000 and $2,000 per person per year; a family of four received more than $8,000 in 2015. The dividend reduces poverty by one-quarter and is one reason that Alaska has the second lowest income inequality in the country. Studies have shown that the dividend has increased average infant birthweight and helped keep rural Alaskans solvent. It has also created at least 7,000 jobs due to the increased economic activity each year. The program, now in its 36th year despite numerous changes in government, is overwhelmingly popular. Sixty-four percent of respondents even said that they would accept higher taxes if necessary to fund the dividend.

In 1995, a group of researchers began tracking the personalities of 1,420 low-income children in North Carolina. Then, something unexpected happened—25 percent of their families started receiving $4,000 per person. They were Cherokee Indians, and a casino had just been built nearby, with earnings flowing to tribal members. This development turned into a research treasure trove. “It would be almost impossible to replicate this kind of longitudinal study,” said Randall Akee, an economics professor at UCLA. Akee found that the impact of the extra cash actually affected the children’s personalities over the years. Behavioral and emotional disorders went down. Two personality traits became more pronounced—conscientiousness and agreeableness. Both correlate strongly with holding a job and maintaining a steady relationship. These changes were most significant among children who started out the most deficient.

Akee surmised that the impact was due in part to less stressful environments. Relationships between spouses improved. Alcohol consumption went down. “We know that the thing poor couples fight about the most is money,” said Akee. Removing that source of conflict resulted in “a more harmonious home environment.” “There is a lot of literature that shows in order to change outcomes among children you are best off treating the parents first,” said Emilia Simeonova, an economics professor from Johns Hopkins who studied the same families. “[The money produced] clear changes in the parents.” She concluded, “Now we have a sense of what even just a little money can do to change these things, to change their lives.”

Most recently, a small trial launched in the United States. Starting in early 2017 in Oakland, California, Sam Altman, the head of the technology firm Y Combinator, is giving 100 households in Oakland approximately $1,000 to $2,000 per month for about a year to measure the impacts on recipients. The goal is to roll out a larger five-year trial afterward. Sam and his friends are giving away $2 million and hiring researchers just to see what will happen. I love the fact that Sam is putting up the resources to study this problem. He’s demonstrating the kind of leadership and vision that, in an ideal world, our government would be capable of.

Enthusiasm is building for a UBI based on both its intellectual and moral appeal and its real-world success thus far. The main counterarguments generally go something like this:

“We can’t afford it.”

Money has to come from somewhere. We’re used to the government spending billions wastefully to no great effect. Trying to raise taxes is a tough assignment in any climate.

What’s fascinating is that a UBI doesn’t actually grow the government. It’s almost cost-free to administer. It doesn’t build a new bureaucracy. It is less an expenditure and more a transfer to citizens so they can use it to improve their lives, pay each other, patronize local businesses, and support the consumer economy. Instead of hiring a new army of government employees, every dollar will be put into the hands of an American citizen and then largely spent within the American economy.

By definition, none of the money would be wasted because it goes to citizens. It’s analogous to a company giving dividends or moneys to its shareholders. No one regards that as a waste of money, because the shareholders theoretically are the owners of the company.

Are we not, as the citizens of the United States, the owners of this country?

As a country, we are easily wealthy enough to manage even a full UBI. Our economy has grown by more than $4 trillion in the past 10 years alone. The U.S. dollar remains the global reserve currency. We are the most technologically advanced society in human history, and increased automation will allow our economy to continue to grow well past its current level. Not only that, but we will get a lot of the money back through new businesses and economic activity, better educational outcomes, improved health and preventative care, better mental health, reduced crime and incarceration, reduced services for homelessness, and many other social benefits.

You know what’s really expensive? Dysfunction. Revolution. Keeping people and families functional will largely pay for itself.

“It will destroy people’s incentives to work.”

All of the available data shows that work hours stay stable or at most decrease modestly with a basic income.

To the extent that people spend less time working, they tend to be young mothers and teenagers, whom we might not mind working a little less if they’re taking care of their kids or going to school.

There are two completely oppositional ideas that many people seem to hold simultaneously: work is vital and the core of the human experience; and no one will want to work if they don’t have to.

These two ideas are at complete odds with each other. Either work is a core of the human experience and we’ll do it even if we don’t necessarily have to, or work is something we have no interest in doing and we do it only to survive.

Setting a Freedom Dividend of $12,000 a year would enable one to barely scrape by. Anyone who wants to accomplish anything, buy something nice, or build a better life for their children will still have to work.

Twelve thousand dollars a year is the equivalent of having $300,000 in savings and then living off the passive income at 4 percent a year. Have you ever heard of someone who gathered $300,000 and then just stopped working? I haven’t. I have seen many people who saved some money and then wanted to save more.

Andy Stern jokes that most of the upper-middleclass children he knows have something called “parental basic income”: their lives are partially subsidized by their parents. Cell phone bills, rent guarantees, family trips and vacations, and so on all come out of the Bank of Mom and Dad. This is the norm in most of the wealthy families I’ve seen. And most of their kids turn out fine in terms of work ethic.

Replacing work is going to be a generational challenge. It will require the great minds and hearts of this era. But getting money to live is an independent question. Getting money to live independent of work will enable us to figure out what work we actually want to do, even if that work is not necessarily in an office or store. This is a much deeper and more fundamental question than how one survives month to month.

Andrew Yang has been active in a number of tech companies and in early 2018 announced his candidacy for president in 2020 on a platform of universal basic income. He is the founder of Venture for America and a graduate of Columbia Law and Brown University. “The War on Normal People: The Truth about America’s Disappearing Jobs and Why Universal Basic Income is Our Future” is available at www.hatchettebooks.com.

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