A Basic Income for All

Facing the possibility that technology could replace so many jobs that a majority of the work force would remain unemployed, the concept of a basic income has been discussed in various books and periodicals. The basic income is envisioned as a minimum guaranteed government payment to all citizens regardless of their private wealth. A popular initiative by Swiss voters will trigger a vote in 2016 on a universal basic income for all legal residents, whether they work or not. The proposed amount of the monthly payment is 2,500 Swiss francs, the current equivalent to about $2,650.


Needless to say, this is a highly-charged, controversial idea, but it has been around at least since an early scheme was recommended in a 1797 pamphlet titled Agrarian Justice written by Thomas Paine, one of the United States’ founding fathers. (See http://www.ssa.gov/history/tpaine3.html.) The concept has appealed at times to both liberals who see it as a fairer means of tackling income inequality, and conservatives who believe it would replace complicated welfare payment systems, like minimum wage, welfare, and housing assistance.


The Economist came out strongly against the basic income as impractical in that it would be enormously expensive. In a May 23, 2015 article, it cited a 1970 study by economist James Tobin in which he estimated that a tax rate approaching 85% would be required to bring all incomes up to 60% of the median, eradicating relative poverty. An earlier article in The Economist (October 4, 2014), however, suggested, “The modest earnings of the generation that technology leaves behind will need to be topped off with tax credits or wage subsidies. That need not mean imposing higher tax rates on the affluent, but it does mean closing the loopholes and cutting the giveaways from which they benefit.”


A May 26, 2015 article submitted to The Huffington Post by writer Scott Santens argues that over 100 current programs that could be eliminated by the basic income. Elimination of Temporary Assistance for Needy Families, food stamps, earned income tax credit, subsidies, and deductions, including the mortgage interest rate deduction, among many others, could amount to a net gain of $1.5 trillion in the federal budget.


According to a new book by Martin Ford, Rise of the Robots: Technology and the Threat of a Jobless Future, a basic income would provide positive economic benefits if designed with the right incentives. Ford wrote, “The income provided should be relatively minimal: enough to get by, but not enough to be especially comfortable.” Ford adds details such as incentives for high school graduation, means-testing for passive income, and incentives for community service. He summarizes economic benefits as follows:


A guaranteed income would offer an economic cushion for all types of entrepreneurial activity, from the person starting an online business, to the ‘mom and pop’ retailer or restaurateur, to the small farmer or rancher facing drought. In many cases, it might be enough to get small businesses through the difficult periods that would otherwise bring about their failure. The bottom line is that, rather than resulting in a nation of slackers, a well-designed guaranteed income has the potential to make the economy more dynamic and entrepreneurial.


Ford adds, however, “The establishment of a guaranteed income will probably remain politically unfeasible for the foreseeable future.”


In recent months, several major retailers including Walmart, Target, T.J. Maxx have raised the hourly wage to $9 per hour for their lowest-paid employees. Aetna, the health insurance company, announced a raise to a minimum of $16 per hour. While there is good economic justification, as Henry Ford realized, for paying workers enough that they can afford the products and services they produce, the trend can be seen as a redistribution of wealth from stockholders/investors to the providers of labor.

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