How basic income could help ease the transition to a new economy

Date
Text Ikaika Hussey
Thread Brave New Economy

As the 21st century progresses, science and technology have continued to advance in response to emerging crises, challenges and opportunities. Already we are seeing amazing advances in the fields of medicine, robotics and alternative energy research. But these same technologies have also begun to cause disruptions in our capitalist societal structure that have increasingly made the world an uncertain place for many.

Combined with the effects of climate change and related ecological disasters, wealth inequality, geopolitical turmoil over resources, and a host of other factors, greater reliance on increasingly advanced technology is forcing us to rethink some of our most cherished political, economic and social structures. This includes the very nature and purpose of work.

Agriculture, the auto industry, shipping, transportation and mining are all headed toward large-scale automation. Jobs in the service and hospitality industries could see heightened automation as well. Even journalists have to contend with automated news aggregation bots these days. In short, unemployment could become a big problem sooner than we think. Retraining programs can help some people enter new industries, but a broader solution to the problem of employment in the rapidly advancing, technological era before us will be needed.

One possible solution is a basic income (also called unconditional basic income, basic income guarantee, universal basic income or universal demogrant). A basic income is a form of social security in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income earned elsewhere through work. Summit spoke with Scott Santens, a writer and an advocate for unconditional basic income (UBI) based out of New Orleans, Louisiana, to learn more.

Summit (S): How did you develop your own UBI?

Scott Santens (SS): I discovered the idea of a universal basic income back in 2013. I was inspired by a Reddit thread examining how quickly technology is advancing and how little people really understand just how quickly that’s happening. That got me to look into the direction that our society is going in, the choices ahead of us and what other options we have, which led me to begin to examine basic income research.

At a certain point I decided that, if I’m advocating for this idea of a basic income, I should see if I could actually put it into practice. I advocate for a $1,000 a month UBI, so I decided to set that as my goal. I used Patreon, which is a platform that allows people to crowdfund on a monthly basis. It’s used by a lot of artists, people who make YouTube videos, musicians, comic book artists and bloggers. It’s a way for creatives to be funded directly by those who most enjoy their work. So that’s what I used to create this basic income.

It was a process that took about a year—to go from zero dollars a month to $1,000. It was a very informative process for me to understand what it’s like to be guaranteed some amount of money. It wasn’t always the full $1,000, but I discovered that even getting some smaller amount still makes quite a difference. There’s a feeling of security that you get, and I didn’t really understand that I had even been missing it until I began receiving it.

S: What do you think about using UBI to replace this kind of hodgepodge of social welfare programs that we currently have, and which we generally don’t fund very well?

SS: Yeah, a lot of people don’t realize how poorly those programs often function. The safety net is full of holes and there are always people who are slipping through. Right now, about 25 percent of American families are receiving some kind of temporary assistance for needy families—cash welfare programs. Around that same percentage of people qualify for housing assistance. These things are temporary and targeted: we pull them away as soon as people start to get back on their feet. We essentially tax people as some kind of perverse reward for actually managing to earn an income on top of their benefits.

If you look at the details of, say, Temporary Assistance for Needy Families (TANF), there are all these strings attached. We don’t want to just give people money, so we insist that they go to school to qualify so that we can say we’re subsidizing education. But even with those benefits, a lot of the poorest people can’t afford to go to school instead of work. So we need to reform a lot of the way that we do this. We don’t have to get rid of everything, which is another thing people worry about, but UBI could certainly alleviate spending on these programs and help us consolidate them.

S: What are some of the experiments and initiatives with basic income that are happening across the world right now?

SS: There have already been full-on universal basic income experiments conducted in places like Namibia and India. Some of the most interesting findings from those tests include a 42 percent reduction in crime in Namibia; self-employment went up 301 percent. In India, the program resulted in something like a third of the recipients starting their own businesses. Overall quality of health improved too.

GiveDirectly has been doing some really interesting work in Kenya and Uganda. It’s a charity that specializes in direct cash transfers to recipients. What they do is comparable to basic income, but it’s not universal. It’s targeted at the poor again. But for those who receive it, it is a basic income. Again, a lot of these people have started their own businesses, and it’s helped the local economy there as well.

There’s this fear over what people will do with the money if we just give it to them, no strings attached, because we think they will somehow act differently than we do. The data from these tests clearly shows that people will spend this money on the same things you or I would: food, medicine, housing, educating their children and making their lives just a little bit easier.

GiveDirectly is set to run the largest UBI experiment to date. They’re investing in this big time, and they’re looking to do a 10–15 year long experiment to give thousands of Kenyans a universal basic income. We’ve never seen anything done to that degree and for that length of time before. Prior experiments, like the Manitoba experiment in the ‘70s, have typically only last 3–5 years.

The closest we’ve seen in duration is probably the Cherokee dividends in North Carolina. The Great Smokey Mountains study, which is a long-term experiment that just happened to tie in to a basic income experiment, was set up to examine conditions for poor youth in the Great Smokey Mountains region. A few years into the study, a group of youth whose parents were Cherokee began receiving unconditional dividends as their share of casino profits from Cherokee land.

This happened over a long period of time and is actually still ongoing. By this point, there are kids who have actually grown up in families that have been receiving partial basic incomes of $4–6,000 a year since they were young, and the results are telling. What happens to them in school, in the community, how it affects their personalities—it’s all been very positive. The researchers found decreases in things like alcohol and drug use, reduced stress and better family dynamics because the parents weren’t constantly worrying about money.

Finland is about to start a major two-year experiment. The Netherlands as well—they’re doing it at the city level as a way to replace some of their existing welfare programs. They’ll use these tests to compare the way we currently treat welfare—as a negative income tax thing where those who earn less get more, or where there are conditions like you have to go to school—versus a true unconditional universal income where everyone gets the same amount no matter what.

There’s also the Y Combinator experiment that will take place in Oakland, California very soon. That test will be focused on the entrepreneurship angle—seeing what kind of jobs people will choose to do when given a basic income.

S: What are some existing mechanisms that could help get a basic income plan going?

SS: Well, you could look at Alaska as a model for that. Everyone living in Alaska has been receiving a dividend there since 1982. It’s not charity, it’s not based on poverty; it’s just something that you have a right to as a resident of Alaska. The oil companies pay a fee in order to drill there, and the state takes 25 percent of those fees and puts it in the Alaska Permanent Fund. That money is invested into the market and, every year, the state calculates the amount people will get based on the previous five years of market activity. The amount people get varies a little each year but, in general, the amount has actually grown.

This acts as a form of basic income. And what do we see? Alaska has some of the lowest poverty and inequality rates in the country. Alaska is the second happiest state in the union, right behind Hawai‘i, despite having nowhere near the easy climate that accounts for Hawai‘i’s high happiness index. These are not separate things. When you have this increased economic security, you see that it does make a big difference in happiness and feelings of general security.

S: How do we fund UBI?

SS: It depends on where we are. In some places like Hawai‘i, Colorado or California, I think we could copy Alaska’s methods and create dividends in similar ways at the statewide level. Dividends can come from other places than oil. There are lots of other resources that we consider to be common-owned wealth and that can, and should, therefore, generate wealth for everyone.

For example, the electromagnetic spectrum: right now we just give that out. We don’t charge any kind of rent to all the companies that want to use this spectrum, and yet we give them this limited right to access that resource. And that doesn’t really make sense. We should charge rent for those kinds of resource uses and make sure the money collected benefits the whole community. The more states that do this, the more people will accept the idea of a UBI and come to see it not as the rich giving to the poor, but as everybody getting their share of the wealth that we are all generating.

S: The other aspect to this that I find really fascinating is the increased automation of work through robotics and new machines and how that can generate new wealth, freeing up a lot of time for people to do other things besides manual labor. How can we make sure to collectivize or share that new wealth with the broader population and deal with the potential for unemployment?

SS: Right. The big problem people talk about is this possibility of having half as many jobs in 20 years as there are now. On the one hand, if there’s half as many jobs that need to be done by humans, we could all just agree that we only need to work half as often, and all still be employed at the same rate we are now. But no matter what we decide, we need greater flexibility in the way that we go about work and in what we consider to be work. It’s that same fear that people will stop working if they have a basic income when, really, it’s just that they will have more control over their time. You don’t have to work 40 hours a week, you can work 30 instead, which will be great in this future world where there is simply less work to go around.

The other point is that our system now is one in which, increasingly, whatever wealth is generated goes to a smaller and smaller portion of the population. The problem with that is, as automation eliminates jobs which pay people income, they are also consumers and they no longer have the money to spend into the system to create wealth. There’s no way for companies to become successful in the first place if there is no consumer base. It doesn’t matter how cheap you can make that T-shirt if someone is earning zero dollars above what they need to survive. They have to cover their basic needs first, and those things—food and housing, education and healthcare—are increasing in cost even as wages are stagnant.

And this isn’t some far-off problem: we’re already there. We’re already feeling this lack of aggregate demand in the economy; economists are already talking about how to increase that demand and break the stagnation we’re experiencing right now. Over the years, incomes have not risen to surpass inflation and productivity and wages have been decoupled so, essentially, no one has gotten a raise since 1972. But, because I have this basic income I’ve set up, when I freelance an article or something like that, that income doesn’t need to be spent on food and other necessities. It’s spent however I want to spend it. Basic income allows that conversion and it’s already really important in this economy.

The effects of technology on unemployment exists on a spectrum. On the far side of that spectrum is the classic model of 40 hours a week for 30 years. On the far other side of the spectrum is no employment whatsoever because the robots are doing the jobs for us. But, in between, you’ve got part-time work, you’ve got temporary work, you’ve got contract work and the 1099 economy. You’ve got, more recently, this kind of gig-labor, where you carry out paid tasks that are one at a time: you drive Uber for a couple hours and then you do Task Grabber for a couple of hours, and you’ll patch together an income from these different sources. That’s where we are right now thanks to technology.

But we designed our current capitalist system around the extreme of full-time, career jobs. When you engage in task-labor or other kinds of part-time work, you’re not looking at the same amount of benefits. You’re not looking at unemployment insurance, you’re not looking at pensions, you’re not looking at healthcare. There are so many of these things that are left out that we essentially assumed would be part of everyone’s living equation. So people are being left out and they have incomes that range widely from month to month; people are living in an increasingly insecure existence. We need to find ways to change the way we think about work itself and revalue nontraditional models of work.

S: In Honolulu there are lots of, usually, young men with time on their hands and not a lot to do with it. Would a UBI help to keep them engaged with the society they’re a part of and not make them feel like they’re just loafing off?

SS: Absolutely. Based on the evidence from these early UBI experiments, it’s clear that people are empowered to be productive when they have the security of a basic income. It’s this weird, almost paradoxical thing, but you have to have the basics covered before you can think about pursuing some avenue of creativity. And when you don’t have the basics covered, you feel like you can’t do anything at all, and the result is that loafing around behavior that can lead to crime, homelessness and other social problems. But as soon as those basics are covered, people feel like they have all kinds of possibilities before them all of a sudden; it motivates and activates them to innovate and to, quite literally, follow their dreams.

These experiments have tested and proven this. People engage more in their communities; they do more work, not less, when given this basic income to live on, and it’s work that they want to do, not that they have to do. This provides huge bumps in innovation, entrepreneurship and creativity. The India experiment showed that people earned around 18 percent more, above and beyond what their basic income was, once they had it, compared to what they earned before the basic income test was implemented.

And that is really one of the huge differences between our current welfare model and the UBI model: with UBI, there are no strings attached. You aren’t required to do anything in particular and, because of that, you think differently. You aren’t some charity-case that comes with all the stigma that’s attached to that. And, crucially, you aren’t effectively punished for getting a job the way you are when your welfare benefits are cut out from your income as a result of trying to be productive. That’s a huge disincentive to work. The UBI does the exact opposite of welfare programs in that regard. Instead, the UBI encourages people, not only to work, but to work in increasingly non-traditional, innovative, creative fields.

S: What could we do in Hawai‘i to realistically find a way to pay for a UBI?

SS: Well one of the easier ways to do something like this is through value-added taxes. So if you did a value-added tax in Hawai‘i, you could use the tourism industry because it profits off of the natural beauty of the islands—something that belongs to everyone. You could design it a number of different ways. Let’s say the average increase in expenditures for the average person living in Hawaii is $50 after the tax is implemented, but they’re given $150 a month. All that money, or most of it, is going to be extracted from tourists and, of course, they don’t get the dividend because they don’t live here. The same kind of thing could work in New Orleans, where I live, at the city level.

S: We also have a very military-centric economy in Hawai‘i, and part of the problem is that the federal government has never paid rent for any of the lands that they seized after the overthrow of the monarchy about 120 years ago. There’s also huge cleanup costs related to military superfund sites with massive amounts of pollution. It would be wonderful to find a way for the federal government to pay for back rent and the cleanup of our land. And to maybe express that debt in terms of a UBI to help the people living here.

SS: That reminds me of another way that this could work really well on a city level: introducing a land-value tax. I think a land-value tax dividend would work really well in places like New York City and San Francisco where the land value is so expensive and people who don’t even live there are buying up all this property as investment. It’s crazy to think that there are people in China that own buildings in New York City, or even just vacant lots, and they’re just sitting on this land with the intent to sell it again at increased value later on. There’s so much speculation going on that we shouldn’t be allowing without the community benefiting in some way. We’re in desperate need of housing and they’re just sitting on these lots so they can sell them later. They should be charged an annual rent to keep that property.

S: Economists describe that as the most fair tax.

SS: Yeah. It’s one of those rare things that we can’t unintentionally decrease through taxation. The land isn’t going anywhere just because you decide to tax it. And it would be very progressive because most of the land is owned by people with all the money.

S: What’s the long-term benefit to society from providing a UBI?

SS: This is one of the most powerful arguments in favor of a UBI: the savings potential. When people ask me if we can really afford a basic income, the question I ask in response is, “can we really afford to continue not to have it?”

One of the major findings from the Manitoba study was that hospitalization rates decreased by 8.5 percent after the basic income was implemented. And we know that poverty is a major factor in our healthcare spending. Keeping people out of hospitals through preventative measures like getting better nutrition and decreased drug and alcohol use saves us millions in the long term.

Crime is another big expense that could be drastically reduced with implementation of a UBI. How much does it cost us when somebody steals something and they end up going to prison? We end up spending around $50,000 a year to keep them there when they never would have ended up there had they been able to afford to purchase what they tried to steal. Not only that, but the wealth they might have generated had they remained productive in society is lost. And then there’s the high rate of recidivism because we make it so hard for former convicts to earn a legitimate income once they re-enter society.

We’re wasting all this potential within our society for creativity, innovation, wealth-generation and social equity because we keep trying to do things using this outdated model. We need policy makers and thinkers to come together and figure out ways to move us away from that model, and I think UBI will be a very important part of that restructuring of our society.

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