“We must attack poverty at its core.” Is a universal basic income the answer?

by Andy Stern, The Ronald O. Perelman Senior Fellow, Richman Center, Columbia University, Thursday 14 April 2016, https://www.weforum.org/agenda/2016/04/we-must-attack-poverty-at-its-core-is-a-universal-basic-income-the-answer/?utm_content=buffer6d368&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

This post first appeared on the World Bank Jobs & Development blog.

People stand on a platform at a train station in Tokyo December 8, 2014. Japan’s economy shrank more than initially reported in the third quarter on declines in business investment, data showed on Monday, surprising markets and backing premier Shinzo Abe’s recent decision to delay a second sales tax hike. A look at the possible benefits of national basic income programmes. Image: REUTERS/Yuya Shino

In 2010, I seemed to be at the top of my game: leader of the US’s largest and most influential union, a central player in the most significant piece of social legislation since the establishment of Medicare, and appointed by President Barack Obama to sit on the bipartisan Simpson-Bowles Commission to propose an answer to the country’s long-term deficit problems. Despite this, I stepped down that year as president of the Service Employees International Union (SEIU).

I didn’t resign from SEIU because I was bored. Rather, after nearly fifteen years at the helm of SEIU, I had lost my ability to predict labor’s future. I could do that in the 1990s and early 2000s. But, by 2010, the economy was changing and fragmenting at such warp speed that I couldn’t see where it — or labor — was headed. At the end of that year I embarked on what became a four-year journey to discover the future of jobs, work, and the American Dream. My journey coincided with significant economic trends — a jobless recovery and the concentration of more and more wealth in the hands of fewer and fewer people.

Wages were stagnant. People had to work two or three jobs to stay afloat. Students were coming out of college thousands of dollars in debt and with no substantial job prospects. Early on, I saw that unions would play only a limited role in shaping the twenty-first-century economy. Not only because unions are typically slow to adapt, but also because the economy is being transformed by new technologies that will automate more tasks and require fewer full-time jobs, and marginalize the role of collective bargaining, leaving a dearth of dues-paying union members.

Already, the new landscape of work is populated by free agents and temporary workers who have more freedom and flexibility in their work life, but no job security and significantly less leverage with the people and companies who hire them. My focus turned to larger questions: If there are significantly fewer jobs and less work available in the future, how will people make a living, spend their time, and find purpose in their lives? Also, how can we keep the income gap from growing so wide that it erupts into social discord and upheaval?

I believe there is a solution – the universal basic income or UBI. Imagine a check coming in the mail each month to every single American, whether they work or not, with sufficient money to eradicate poverty and give everyone the opportunity to achieve their dreams. A UBI may be the most practical solution to our economic problems, and one that most, if not all, of our country’s political parties can potentially embrace.

It works elsewhere…

There have been several other basic income experiments, mainly in Canada, Africa, and Europe. In the mid-1970s, the tiny Canadian town of Dauphin acted as guinea pig for a grand experiment in social policy called “Mincome”. Their aim was to determine if a guaranteed minimum income acted as a disincentive to work. During the five-year experiment, only two groups of people were found to work fewer hours: adolescents (because they felt no pressure to support a family) and new mothers (because they wanted to spend more time at home with their infants). There were several other findings. As expected, poverty disappeared. And, unexpectedly, hospitalization rates went down, especially for admissions related to mental health and to accidents and injuries. High-school completion rates went up, suggesting that a guaranteed annual income, implemented broadly in society, may improve health and social out-comes at the community level.

In 2008 and 2009, a basic income experiment in the impoverished Otjivero-Omitara region of Namibia produced a number of intriguing outcomes. There was an increase in entrepreneurship, evident in the fact that the average income grew 39 percent beyond the basic income and that many recipients were able to start their own small businesses — for instance, baking bread, making bricks, and sewing dresses. The guaranteed basic income had increased households’ buying power, creating a local market for these goods. Among the other outcomes: the basic income reduced the dependency of women on men for their survival and gave them a greater measure of control over their own sexuality, freeing them from the pressure to engage in transactional sex. It gave HIV-positive residents more time and resources to travel to the town of Gobabis to get their medication. The number of children considered underweight fell from 42 percent to 10 percent. Dropout rates fell 40 percent, partly because parents had more money to pay school fees and for uniforms. Household debt fell, savings increased, and there was increased ownership of livestock and poultry. Finally, there wasn’t the expected increase in alcoholism, partly because the community committee reached an agreement with local shebeen owners not to sell alcohol on the day the government disbursed the monthly grants. In July of 2015, it was reported that the Namibian government was “strongly considering” a national basic income program.

In 2017, Finland will begin a two-year pilot that promises to be the most rigorous test yet of a basic income in a developed country. Finland’s center-right government has set aside €20 billion to fund the trial, which will look at a variety of models, including a full basic income that replaces most means-tested benefits, a partial basic income, and a negative income tax in which benefits pay out as people earn more money.

When I refer to a jobless future, I’m by no means suggesting that there won’t be any jobs. However, I do think that we are heading to-ward a world with fewer overall jobs—perhaps tens of millions of them. In that world, the jobs that are left will either be extremely well paying and secure, or contingent, part-time, and driven largely by people’s own motivation, creativity, and the ability to make a job out of nothing. The current social contract puts this second category of worker at a disadvantage.

My support for UBI is born from a belief that we must attack poverty at its core—a lack of income—rather than treating its symptoms. Also, with major technological advances eliminating more middle-class jobs, new systems of universal support are required. Lacking good jobs and satisfying work, the next generation will desire to build a life outside of poverty and low-wage work, and we should endeavor to give them that opportunity.