Would Basic Income Encourage or Discourage Work?

The most common; and logical argument, against basic income is that it would discourage work. This reasoning is backed by common sense, which tells us that providing an unconditional income would give people not to work.

Or would it? People are motivated to work by a wide variety of factors, including pleasure, ambition, pride, boredom, curiosity, social pressure, obligation, duty and virtue. For example I took the time and effort to craft this blog because I enjoy writing about basic income, not because anybody paid me for it.

No Basic Income Would not Stop some People from Working

Many people would still work because of the emotional satisfaction a job or task provides if basic income were available. In the United States where most senior citizens and some other groups; such as retired military personnel, receive basic incomes many of them still work.

Most of the military veterans; who collect a generous pension after 20 years of service, in the United States are still employed if they are of working age. My guess is that much of that comes from social pressure which casts those without a job as weird or defective. Most of the population of Alaska; which receives a basic income in the form of oil royalties, works.

Yet there are some Americans that abuse our version of a basic income. Many older Americans; who are still more than capable of working, retire after Social Security age (65) and cruise around the country in recreational vehicles.

The answer then is Basic Income would not stop everybody from working. Yet it would give some people a powerful incentive not to work.

So what is Basic Income Anyway?

There is a lot of confusion around basic income, because the idea is not widely known at least in the United States.

A universal basic income or unconditional basic income (UBI) plan is a scheme that would pay every citizen of a country or region a set amount of cash. It would be unconditional because there would be no means testing, or requirements. Everybody would receive the cash payment regardless of race, creed, color, employment status or income.

The idea of a basic income is hardly new variations of it have been proposed and sometimes implemented in societies that date back to Ancient Rome. Many thinkers, economists and statesmen including; Thomas Paine, Milton Friedman, Peter Drucker, Bertrand Russell, F.A. Hayek, Martin Luther King Jr. and Richard Nixon, have proposed variations of according to Basic Income Earth. Despite that the idea was rejected or ignored.

Why Basic Income, Why Now?

The UBI debate has been revived because technological progress is changing the relationship between the individual and the economy. The nature of jobs and wealth in today’s world has called many to question the current economic order and seek alternatives.

These developments in particular are driving the basic income debate:

• The economy in a number of nations; including the United States, is no longer capable of providing full employment. That is a job for everybody that wants one, or has the capability to work. The cause of this is automation and digitalization which eliminate the need for many workers.

• Our existing mechanism for wealth redistribution; jobs, is no longer working. The bottom 50% of Americans own just 12.8% of the wealth; as recently as 1970 they owned 20.8% research by economists Thomas Piketty and Emmanuel Saez indicates.

 

• Wealth is increasingly no longer tied to jobs in today’s world. Income inequality is growing; because most wealth in today’s world is generated by investments and technology. This favors the wealthy; who own the machines and investments, at the expense of middle and working classes who rely on salaries for income.

 

• Research by Piketty indicates that the incomes of the wealthiest one percent of the Americans grew by 300% over the last 30 years. During the same period the incomes of the poorest 50% of Americans stayed flat.

• Existing welfare arrangements are not designed to deal with this situation. For example unemployment insurance offers relief for short term joblessness. Benefits might not be available to a person who finds a “job” that pays far less than one lost to automation.

 

• The existing welfare system in some countries discourages work. An unemployed worker that takes a job might trade a reliable benefit for an unreliable wage. Welfare benefits might actually be more valuable and useful than some jobs. In the United States, an unemployed person that takes a job might lose Medicaid, and have to buy a health insurance policy that might cost a third of his salary. This encourages many people not to work, or to work off the books for cash.

 

• The existing bureaucratic social services system is inefficient, expensive and often fails to provide aid to those who need it. For example a person might be denied benefits because he or she or owns a car, owns real estate or stocks, has a bank account or works at a part time job. It can also take longer to apply for unemployment insurance than to apply for a mortgage in some parts of the United States.

• Many people in today’s world; such as gig economy workers, are in situations that the welfare system was not designed to deal with. An Uber driver faced with a slow stretch; or an injury that prevents her from driving, might be ineligible for benefits even though she is completely broke. A person working at a part time “job” is “employed;” but might not make enough money to rent an apartment, yet she might not qualify for benefits.

 

• Modern technology such as digital wallets; and payment apps, makes it possible to cheaply and quickly distribute money to large numbers of people with little or no bureaucratic infrastructure. This means UBI might be cheaper than modern welfare systems which require legions of highly paid clerks and social workers to function.

 

The unconditional basic income proponents will argue that their solution will address these situations. Individuals would be able to take part time jobs without fear of losing benefits, and the self-employed would have a safety net to fall back upon.

Many of them would argue that UBI will actually encourage more people to work. This argument is unproven but one thing is definitely clear, the present system is broken and needs to be fixed. What is not clear is if UBI is the answer or not; but it might be a better and more humane system, than the current bureaucratic status quo.