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Guaranteed Basic Income

Copyright 2016 by Wil C. Fry

Published 2016.09.29


My position: I believe Guaranteed Basic Income could provide the lone viable solution for massive job loss due to automation. In the end, I think the benefits would outweigh any negative effects.



Introduction


I first heard of the idea a year or two ago, and it seemed farfetched. “Guaranteed Basic Income” isn’t a completely new idea — it’s been floated as long ago as the 1700s, by Thomas Paine (in Agrarian Justice) — but it seems relatively recent that it’s gaining any traction in the popular imagination. Simply put, this is the idea:
Every adult citizen receives a tax-free income check from the government, enough to provide basic sustenance, shelter/utilities, transportation, and medical care. There are no restrictions or conditions on how that money can be spent, nor any qualifications or restrictions on who can receive it — except for “citizen” and (possibly) “of age”.
Your first thought is probably “Whoa!” — at least that was my first thought. That’s a lot of damn money. With 245 million adults in the U.S., and assuming that a “basic income” is at least $1,700 per month (the amount proposed in a Swiss referendum, adjusted for the cost of living), it would cost the U.S. $417 billion. Per month. That’s about $5 trillion per year, bigger than the current annual federal budget.

I was tempted to drop the idea then and there, purely for practical reasons.

What kept drawing me back is the increasing number of economists and policy-makers who are considering the idea. So naturally I wonder: what’s the draw of a program that would cost this much? Obviously, the attraction for those on the bottom rungs of society is “Free Money!”, but many of the people considering this idea are not on the bottom rungs of society; in fact, some of them stand to lose quite a bit in taxes if such a thing ever passed — because it would require a dire tax increase. (In fairness, I must mention that there are many economists and policy-makers against the idea too. Here’s one source.)

There are multiple arguments in favor of Guaranteed Basic Income (which I will henceforth refer to as “GBI”), and several arguments against it. I will explore them each below.


Automation Is Coming, Like It Or Not


The primary reason the idea is being floated in our time is increased automation: “...what if we’re entering an automated future where there won’t be enough jobs for the people who need them? If this happens, how will people pay for food and shelter?”

Each year, new fields of employment are targeted for automation. Even without full automation, many technological advancements mean greater productivity per worker, which means employers don’t need as many workers.

Some jobs that are currently under threat of automation by machines include all drivers — to include taxis, buses, delivery vehicles, and even long-haul trucks — fast food employees, janitorial services, factory workers, pharmacists, anesthesiologists, insurance brokers, architects, stock brokers, loan officers, teachers, human resources, advertisers, paralegals, and even many news writers (one source of many).

* “But my job can’t be automated!”

Computer programming has come a long way, and has far yet to go. True, there are some jobs that will be more difficult to automate, and thus will be the last to go, but most people don’t have those jobs. Most people are office clerks, customer service representatives, retail clerks, drivers, nurses, secretaries, bookkeepers, accountants, low-level supervisors, teachers, factory workers, and so on.

When I was a child, two men used to ride clinging to the back corners of every garbage truck in the land; their job was to dump each household’s trash container into the back of the truck and replace it (close to) where they found it. Now there’s just the driver. A giant metallic arm extends to lift the trash container and dump it into the truck. There aren’t any employees clinging to the back anymore. (This isn’t actually “automation”, because the driver is controlling the robot arm, but it’s an example of how a relatively simple machine can replace a once-standard job.)

* “But have you seen how stupid automated systems are?”

...referring to the machine voices that answer phone calls or “smart” programs on their phones and PCs. Those use years-old programs, programs that have already replaced many thousands of jobs. There were once half a million telephone “operators” in the U.S., before phone companies realized customers could push a few extra buttons without help — and that massive computers in the background could do the work once performed by hundreds of thousands of women. Every company worth its salt once had rows and rows of telephones, answered constantly by reams of humans — whose only job was to find out which department you wanted. Those jobs are almost entirely gone.

When I was a child, one-hour photo booths began popping up everywhere. You could drop off your film, go shopping in the nearest store, and then pick up your processed photos on the way home. Those booths are gone. Yes, you can still get prints at Walgreens, Costco, and so on, but even those departments are now largely staffed by computers, except for the human cashier. Most of us get our photos processed in-device. The last three times I shopped at The Home Depot, I exited without ever dealing with an employee — I rang up my items on self-serve cash registers and paid via machine.

Any job that consists of performing exact, repetitive tasks — cashier, grocery stocker, factor worker — is quickly on its way to full automation. But even more complex jobs that require more levels of decision-making are on their way to automation as well. Because any decision that could confront a human employee can be programmed into a machine.

* “But automation will create thousands of new jobs!”

Try the math. Designers, programmers, repair technicians, etc., will number far fewer than the jobs they will replace — otherwise it wouldn’t be cost-effective to have the robots in the first place. And “cost-effective” is the exact reason companies around the world repeatedly look to replace human employees.

In the past, it’s been true that new jobs have arisen to replace the old ones. As harvesting machines began to do the work of millions of farmers, they moved on to other pursuits. As robots at bottling plants took over the jobs of hundreds of thousands, those workers spread throughout other fields. However, many experts — including some in Silicon Valley who are actually working on the programs in question — say that the technology to automate is now moving faster than the market’s ability to provide new jobs.

However, instead of circling the automation argument ad nauseam — since I only brought it up to get to the main point, let’s move on. If automation is coming, and if it will eliminate millions of current jobs, what are the possible solutions?


For Increased Automation, The Solutions Are Few


As is common with many “future problems”, science fiction writers have already suggested and played-out many possible solutions to this one.

One path popular among libertarians and free market champions is Do Nothing. In other words, “leave the market alone; it will correct itself”. As I have discussed previously, in reality the market tends to protect those at the top, leave the rest behind, and require far too much time to correct itself. If we introduce no new legislation (or remove what few protections that currently exist), my best guess is that untold billions will eventually be unemployed. In order for a free market to survive, there will have to be some money at the bottom — otherwise those at the top don’t get paid — but there is no requirement for those at the bottom to live in a healthy, secure, or comfortable state. See The Hunger Games for an example of how that might play out. This is morally unacceptable to me.

Another idea that some espouse is a “moneyless society”, something like that described in the Star Trek universe. In that concept, technology was the answer: the replicators could make anything, at any time, for anyone. Without scarcity — when every person has enough food, water, healthcare, clothing, shelter, etc. — it’s assumed that the desire for rampant consumerism will dry up, that humans will move on to other pursuits: exploration, art, intellectual improvement, science, etc. But in real life, we don’t have replicators; we have a planet with finite resources — scarcity. And even if we did have replicators, my guess is you couldn’t obtain one without lots of money — and those who did obtain them wouldn’t let you use them for free. A political change would be required — laws enforcing the free use of these replicators.

One idea I tried to float in an as-of-yet-unfinished science fiction work (though I’m sure I first heard the idea from someone else) is that each worker replaced by a robot would — by law — be granted shares in that robot’s work, or possibly shares in the robotics company itself. In this way, as automation fully took over the world economy, every adult human would end up with an income. As new humans reached adulthood, they would automatically be granted shares as well, with the ability to buy more later, if that’s how they chose to spend their money. The end point is that no one would “work” in the traditional sense, but everyone would have enough income to survive. Of course, this too would require political willpower of mammoth proportions; no for-profit company will voluntarily hand over shares of its profits to the humans that it’s replacing with robots. Further, I now doubt seriously that this would even work. If McDonald’s replaces an employee with a programmable food-maker, it’s doing so to save money. It wouldn’t make sense for either McDonald’s or the robotics company to then give that same salary to the employee for free. Even if they did, it’s not enough to live. (I’ve worked full-time at McDonald’s; you can make a low rent and get food and basic clothing, but you can’t also afford healthcare, for example.) Also, the typical robot in such a situation is meant to replace several employees, not just one. The only possible way for this to be viable is if the automatons become inexpensive enough, numerous enough, and productive enough to free up enough money to spread around — AND if legislation forces that money to be spread around.

Or, we could simply expand today’s existing “safety net” social programs to cover the increasing number of unemployed. But our current welfare setup is a very confused mishmash of dozens of overlapping programs, each with different requirements and loopholes, each with its own failures and frauds, some with different funding sources (Social Security, for example, isn’t funded through the normal federal budget), and all of them together are not actually reducing poverty, at least not by much — the poverty rate has actually increased among working-age Americans, though it has decreased significantly among the elderly and somewhat for children. Also if we somehow levied greater taxes at the top and spread them more efficiently to the bottom, we’re now basically talking about GBI.

The only viable one left is GBI.


‘Real Freedom’ Includes Economic Freedom


An ideological reason to support GBI, even if increased automation never takes away any more jobs is “real freedom”.

Some proponents of GBI say their real goal is “real freedom for all”. The idea is: without economic freedom, the other freedoms guaranteed by constitutions mean very little. You might have freedom of speech and religion, freedom of the press, and so on, but can do very little with them if you spend every waking moment worrying about finances — how to pay the rent, where the next meal is coming from, how to pay for car repairs so you can get to work to afford the car repairs, and so on. Millions in our country alone live daily in such a state. I lived in that state long enough to know how true it is.

This ideological reason for GBI can stand alone, even if automation never replaces millions of jobs.


The Possible Positive Effects Of GBI


First, not every GBI proposal is identical. I am not proposing a specific dollar amount, but rather a “to be determined” amount, which would be enough to cover basic living expenses, including healthcare. I don’t know what a fair amount should be. I do know that housing and healthcare costs vary a LOT across our country. Food, transportation, and utility costs also vary, but not quite as much. I believe the most difficult part of writing decent GBI legislation would be figuring out how to compensate for the drastically different costs of living across the country.

I also propose that whatever amount is set initially, that it would be tied inextricably to the prices of these items somehow, perhaps via a formula yet to be developed. A thousand other details remain to be worked out, including how to most efficiently distribute the money and how to best determine who gets it.

The following are some of the assumed immediate and eventual positive effects:

GBI could eliminate several current systems and overlapping bureacracies. Unlike every other welfare or social safety net program ever tried, this idea does not require the recipient to be poor, old, disabled, sick, or otherwise disadvantaged, so it removes the burden of having to prove those disadvantages, and therefore removes the need for expensive fraud investigations. It’s just a simple payment to each adult citizen. The only thing that would have to be proved is citizenship and age, presumably things the government already knows.

Dozens of federal and state agencies could close. GBI would be massively more efficient than current systems, eliminating the need for dozens of federal bureaucracies: Social Security, food stamps, unemployment divisions, Medicaid, Medicare, etc., many of which have 50 state agencies each handling the distribution differently. There could simply be one federal agency charged with delivering this paycheck to all adult Americans.

If constructed correctly to adjust for inflation/cost of living, it would eliminate the need for most domestic charities — soup kitchens, homeless shelters, and so on. From then on, almost all charitable giving would go to those in less fortunate countries. (And, if constructed this way, it could also eliminate any market fears about inflation, since GBI would rise with it, automatically.)

GBI would eliminate the need for any minimum wage laws. Any salary earned on top of a person’s GBI would be used for luxuries rather than needs. It would ensure that every employee had full bargaining power to negotiate a fair salary for any work performed. Today, there is very little bargaining power for many workers, because the choice is often between (1) having no income or (2) having very little income. If every worker already has enough for food, shelter, clothing, transportation, and healthcare, then they’re not so desperate when applying for a job.

I can tell you from personal experience that many workers today stay at bad jobs because they have to pay rent next week, or because the electric bill is past due. More than 60 million American workers have zero dollars in savings. Forty-seven percent of Americans said a $400 emergency expense would put them in debt or force them to sell something. Fewer than a third of Americans have the recommended “six months’ worth” of expenses saved in an emergency fund. So, if they’re paid too poorly, mistreated at work, suffer sexual harassment or racial discrimination, forced to work in dangerous or illegal conditions, etc., they’re not in a position to complain, renegotiate, or just leave. GBI removes that unfair advantage of employers.

In effect, the current “floor” for U.S. salaries is “absolute poverty” — having nothing. With GBI, the floor would be raised to “having enough”.

GBI could also add a degree of stabilization to the economy, especially at local and state levels. Small and medium-sized cities are often sent into downward spirals when a single large factory or business closes; and the reverse is true too — they can be boosted overnight by snagging a new one. GBI means a safety net for everyone.


Downsides To GBI


Of course, as I mentioned at the top, the Numero Uno Problema is “¿How Do We Pay For Such A Thing?” Critics of GBI proposals have a long list of disadvantages, some of which can’t be denied. They include the following:


The Cost


The cost is a real and huge one, but it’s not insurmountable; just large enough to be scary.

When Thomas Paine suggested the idea in the 1790s, he theorized — based on his deistic beliefs — that God had given the Earth to all persons as an inheritance, that it was therefore “the common property of the human race” and that “every man would have been born to property. He would have been a joint life proprietor with rest in the property of the soil, and in all its natural productions, vegetable and animal.”
“There could be no such thing as landed property originally. Man did not make the earth, and, though he had a natural right to occupy it, he had no right to locate as his property in perpetuity any part of it; neither did the Creator of the earth open a land-office, from whence the first title-deeds should issue. Whence then, arose the idea of landed property? I answer as before, that when cultivation began the idea of landed property began with it.”
He proposed that those who used the natural resources of the planet should pay “to the community a ground-rent for the land which he holds; and it is from this ground-rent that the fund proposed in this plan is to issue.”

Paine was discussing almost exclusively agriculture, but the same idea can easily be applied to other “common property” in the Earth: oil, metals, water, rivers and coastlines. This was quite the socialist idea in a time before socialism was well-known, to claim that all of humanity together owns the Earth, and therefore anyone who exploits it owes payment to all of humanity.

His idea can be broken down to: “You pay us to use the Earth, and we’ll pay you for what you make of it.”

Modern GBI proposals have strayed from this ideal, most often proposing giant tax burdens to pay for it. Does the math add up?

The gross domestic product of the U.S. in 2015 was about $18 trillion (nearly twice that of China, and greater than the combined EU GDP). If, as cited above, the per-adult GBI will be $1,700 per month, it amounts to about $5 trillion annually, less than a third of our GDP.

So yes, it's doable, but still massively expensive.

However, simply stating that the cost would be $5 trillion is dishonest, because it doesn’t take into account massive savings in other areas.
However, simply stating that the cost would be $5 trillion is dishonest, because it doesn’t take into account massive savings in other areas. For example, here are some caveats to keep in mind:

(1) All other safety net programs (Social Security, and all welfare/entitlements) could be completely dismantled, because GBI is intended to replace them all. Much of our current tax burden is aimed at those programs.

(2) Military expenditures could drop by as much as a quarter. Currently more than one-fourth of the Department of Defense’s budget is for “the pay and benefits of current and retired members of the military” — much of which could be replaced by GBI. The same would hold true for the 2.79 million civilian employees of the government. While the government could still offer payment and benefits to its employees, both civilian and military, those amounts should be minimal, since GBI would meet the basic needs of each.

(3) Payroll expenditures for all employers could be drastically reduced, across the board, nationwide — due to elimination of minimum wage laws and the knowledge that every employee’s basic needs are met by GBI.

(4) All employer-sponsored benefits packages could be greatly reduced as well, including healthcare packages and retirement accounts — because GBI would be designed to cover those. (You’d get GBI for life, so no retirement savings are needed.)

The first two would free up many billions of dollars in current federal spending, which could then be subtracted from the price tag of GBI. The last two caveats free up billions in private spending, which could then be subtracted from the expected tax increase to pay for GBI.

So, while GBI would surely mean a greater tax burden for corporations and the wealthy, as well as a greater tax burden on any income earned beyond the GBI check, it would surely not be as sharp an increase as it initially appeared.

Disruption of society/economy


Another real problem would be the disruption of society and the economy. Of course, we can’t predict exactly how much disruption would occur, but we know it would happen. Immediately, the government bureaucracies (including at the state level) would be shaken up — hard — as benefits and welfare offices close nationwide. Other government departments, including the IRS, would have to change quite a bit. Other fallout would certainly include the closing of many charitable organizations (which are no longer needed). Price fluctuations would ripple throughout the market. (Remember, prices are merely predictions of how much you’re willing to pay; in a completely different economy, it would take a while before companies settle the prices to match new consumer ideals.)

Of course, with GBI providing the universal safety net, the outcome would be softened. Today, if we closed all those offices, we would suddenly have millions of unemployed persons. The economy would crash. But with GBI, every one of those former government or charity employees would still be able to pay basic bills.

Other scary predictions have little basis in fact; we just don’t know.

People would have no incentive to work


One negative aspect touted most often is “people won’t work anymore”. Without incentive, or with very little incentive, to work, why would people do it? You might assume this is true, but no one can say for certain because it’s never been tried on a large scale. (It has been studied only in small, localized, and temporary cases.) In the few small experiments with GBI, people did indeed work less, though not as much less as might be expected: only 5-7%. No one quit entirely. More teens were more likely to finish school, and more adults were more likely to attend continuing education (both of which are known to contribute well to society in the long run).

For large-scale GBI, perhaps the best we can to at this point is thought experiments. I can ask myself: would I still do something useful/productive/worthwhile if I wasn’t promised any pay for doing so? I’m a stay-at-home parent, so I can already answer this question for myself. I’m not “paid” (in the traditional sense) for my “work”, but I do it anyway because it’s important to me, and I believe that I (like all parents) serve a useful function in society by preparing my children for adulthood. Would I work harder at parenting if I was paid specifically for that? I suppose it’s possible, but I’m fairly certain that I’m already doing as well as I can at it. And millions of stay-at-home parents before me (mostly women) have already performed this important task for no pay (other than being provided basic necessities of life, which is exactly what we’re talking about with GBI).

What about other jobs? Would I leave the house to be a garbage collector if GBI already covered my basic needs? Perhaps not. On the other hand, maybe I would do it, because the alternative would be garbage piling up everywhere. (On the third hand, garbage collector is almost certainly on the short list of jobs that will be replaced by automation.) What about school teacher? Some people enjoy teaching children. I don’t think I would hate it, especially if I wasn’t trapped into it by financial desperation. Journalist? I actually enjoyed that, in my small-town newspaper experience. In fact, while working there, I said on multiple occasions that I would still do it even if a giant lottery win brought me financial independence.

See, there are many jobs that people do because they enjoy the work, and/or because they see it as useful or necessary for society. Building things, teaching children, cleaning, many fields in medicine, architecture, electronics, computers, radio, administration... the list could get endless. The reason we do those things for money is because we need the money, the way our system is set up. But many of us would do those same things without pay, or for very little pay, if GBI provided for our basic needs. At least I think most of us would.

But perhaps the best argument against the “people won’t work anymore” trope is the near-certainty of coming automation. People won’t need to work as much anymore, nor will they have as much opportunity for it. The “missing” productivity will almost certainly be surpassed (at some point) by the machines. And many (most?) of the jobs that people won’t want to do if they don’t have to are the very jobs that will certainly be replaced: grill cook, grocery stocker, cashier, garbage collector, farm hand, janitor, etc. Remember that by definition jobs that require only “unskilled labor” are the jobs that are most easily replaced. The rest are jobs that people enjoy doing or at least don’t mind doing.

Vast Increase In Immigration


Critics also say that any nation implementing GBI would be the target for immigration. Struggling citizens of other nations would hear about the GBI in your country, and give up everything to come there, hoping for a free ride. Immigration is already of great concern to many Americans, millions of whom crazily say they will vote this November to have a 102,514-mile wall built to keep out the immigrants. (Note: this wall will not keep out airplanes, which is how many immigrants arrive in the U.S.) With or without a wall surrounding the entire nation, it is surely a possibility that enacting GBI would draw many from elsewhere, though I don’t believe it’s certain.

For one thing, no GBI legislation has even been proposed or even written in the U.S. There is no cosmic law that would require us to give this money to anyone who showed up. I am certain that any legislator who proposed such a bill would make it clear from the beginning that it would only apply to U.S. citizens, just as I am certain that no other legislator would vote on such a bill unless that part was very clear. Thus it should have zero impact on immigration, unless the critics are admitting that it would be good for the economy overall, therefore making our nation even more attractive to immigration than it already is.

A ‘Shadow Economy’ Would Rise


Some anti-GBI policy makers have suggested that such a policy would “give rise to a shadow economy” (another way to say “black market”). I don’t follow their logic on this. Typically what causes a black market is banning certain products. For example, if you ban firearms, then a black market will arise to provide firearms to anyone willing to risk jail to pay for them. If you ban alcoholic beverages, then a black market will arise to provide alcohol. And so on. Much like the illegal drug market in the U.S. today could be eliminated completely by un-banning the drugs in question. GBI has nothing to do with banning any types of products or services. Any “shadow economy” either already exists or would arise for unrelated reasons.

Higher Prices Would Negate Any Benefits


One last criticism of GBI is that it would result in higher prices, thus negating any positive effects. This too, I think, is an unrealistic fear, especially if we stipulate (as I have done above) that GBI would be implemented not at a specific amount of money, but at a specific level of life-quality. In other words, any amount paid to citizens would be the result of adding up how much it costs to live. I very carefully do not advocate for GBI if it would be a dollar amount that’s difficult to change, such as today’s nearly-useless minimum wage laws. If GBI is passed at $1,700 per month, then prices could easily rise to make that amount pointless. But if GBI is passed with specific provisions listing what it should be able to pay for — food, basic living quarters, utilities, clothing, transportation, and healthcare — and if it is set to rise when those prices rise, then this criticism makes no sense.


Conclusion


As pie-in-the-sky utopian ideas go, the proposal of guaranteed basic income is not the most horrible one I’ve seen. It does not institute the long-dreaded (by Americans) socialism or communism, but leaves capitalism in place — only with a raised minimum (from zero to “enough”). Having given it some thought, I am beginning to be convinced that a nearly unfettered market could be a good thing, if something like GBI were implemented.

While it is reasonable to be concerned about possible upheaval, I think the results of not doing it could be much more worrying.

As to the disagreements among experts on how much it would cost or whether the results would be negative or positive, all of those are disagreements about guesses.

One facet upon which we can disagree without guessing is the morality of the proposal — because morality is subjective and therefore different for each of us. I feel certain it is moral to attempt to eradicate poverty, even through government actions, and immoral to ignore it. Some with different moral codes disagree; they believe it is immoral to “punish the wealthy” with higher taxation, and immoral to offer money to people unless it is in exchange for goods or services. I disagree, partly based on Paine’s assertion that the Earth and its resources are common property of humanity, and partly based on my lack of reverence for capitalism — due to its track record.

While it is impossible to predict the complete ramifications of GBI, I think it is one of very few viable solutions. However, I have next-to-zero faith that anything resembling GBI could be passed in the U.S. in the next few decades. I hope I am wrong. Public opinion in the U.S. is capable of shifting very quickly, as it did with gay marriage over the past decade or so. Perhaps it will shift on GBI, as certain future changes become more apparent.

Some things that have to happen before GBI can even be considered here: (1) More people need to be aware of what it is. (2) We need to see some hard proposals, lists of numbers that can actually be debated. (3) We’ll need an explanation for how an identical amount of money would be of the same help to a person in Seattle as it would to a person in the rural south — where the median home price can easiliy be 90% lower.








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