A Universal Basic Income – Part II – Benefits

It is hard to pick the most important benefit a Universal Basic Income (UBI) would bring; there are many. The benefits can be placed into two broad categories: those that represent increases in economic justice, and those that represent increases in personal stability.  Market economies have no built-in sense of justice and are fairly chaotic (especially from the individual’s viewpoint), hence why it’s important to highlight how a UBI can combat these problems.

Close the Cliff of Success

My personal favorite benefit is a simple one: removing the “Cliff of Success”.  A term I coined, the Cliff of Success refers to the situation where a person who is living on assistance would actually do harm to their financial situation by taking a job or otherwise being financially independent.

A good example of this was presented on the PBS Frontline documentary Poor Kids.  A single mom and her kids are living for free in a shelter for families.  They receive a meager assistance per month, but once they become “stable” and the mom gets a part time job, they are forced to move out.  This is actually a bad thing for them as their overall income decreases with the sudden introduction of a monthly rent and a loss of welfare.  Such a situation is tragic for the family involved, and serves as a great example at how a non-UBI welfare system disincentives success.

Personal Empowerment

With a UBI, we can move towards decoupling a persons’ job from their livelihood – if food, shelter, and healthcare are taken care of, they are empowered to not take shitty jobs or stay in shitty situations.  “I have to endure this sexually harassing work environment to support my kids,” and “I’ll be homeless if I don’t put up with these unsafe conditions,” would be things that actual human beings might not have to think as often.

I hope the impact that this could have is self-evident from a couple of examples.  I can’t find more words to say to express how important I think it could be.

Stimulate Demand

Despite what some people claim, demand is what drives economic growth.  It’s been shown that direct credits to individuals from the government have the largest positive impact on the economy.  Put simply, people with little money spend much more of what they get, as opposed to the wealthy who are much more likely to put their money in savings.

Lower income persons are the grease that keeps the economy moving.  When they’re strapped for cash, things seize up and the effects are felt everywhere.  When they have money to spend, things keep whirring along smoothly, especially for those higher up the income ladder.

Think about Little Village in Chicago.  It’s a low income area far from the flashy central business district, demographically composed mostly of Mexican immigrants and their families.  It’s a row of small factories, shops, and restaurants a few miles along 26th street, and it’s the second largest source of tax revenue in the city behind the much swankier Magnificent Mile.  Many people with a lot of business to do, a lot of demand to be satisfied, have their transactions tremendously add up with a correspondingly large economic impact.

Here is a good paper that found that of the post-2008 depression stimulus spending, it was grants to low-income households that had the greatest effects.

Simplify

Efficiency for its own sake isn’t a good reason to make a major policy change, but in this case it’s a very attractive side-benefit.  Obviously the numerous social safety net agencies can be combined into a single entity, which would provide a much streamlined operation.  Additionally, resources that are currently used for means testing, eligibility verification, or case work would no longer be necessary and would be freed up to handle less bureaucratic, possibly more impactful pursuits.

The agencies running the following programs could be merged into a final UBI managing entity:

  • Welfare
  • Heating subsidies
  • Food stamp programs
  • Social security administration
  • Unemployment insurance

Avoid the Safety Nets of Last Resort

When your brother, sister, uncle, cousin, or close fiend has a rough series of life events and has nowhere else to turn, you may become their safety net of last resort.  This is noble and right.  It’s also unfair.  When you provide that safety net you’re also depriving yourself of college savings for your children, of retirement savings, or you could possibly be depleting your own emergency accounts.

The government already acknowledges this issue by providing unemployment insurance, food stamps, social security, and welfare, but when they place time limits and benefit caps on these things they’re simply kicking the problem down the road a year or two.  A better solution would be to ensure we all have a permanent safety net from the government, so that none of us are faced with the prospect of burdening our loved ones.

Reduce Job Loss Stigma

Someone who does lose their job doesn’t want to be a burden on their family or friends.  A UBI means individuals may not have to make that choice to ask for help, letting them retain their independence.

We also have a problem in this country of people going on shooting rampages against their families and against their previous employers after getting let go.  This is another topic we don’t have research on, but I have to assume that if a person’s basic welfare were less ties to their employer, they would have a less violent reaction to losing their job.

Crime Reduction

Maybe.  I’ll admit I don’t have statistics to back up the assertion that a UBI would reduce crime, but I have a strong suspicion that it would.  The logic works like this:  most property crime is caused by persons who are addicted to drugs or who have committed previous crimes that prevent them from having access to welfare.  I’m not claiming these are people stealing to buy bread for their kids, but I’m guessing if they had access to jobs they’d take them.

I don’t believe that crime reduction should be thought of as a primary benefit of UBI, but if it’s a side-effect I wouldn’t complain.

Next Up

In the next post I’ll be talking about the cost of UBI (not as much as you might think), with lots of crunchy numbers.

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