Here's Why Everyone Should Get a Basic Income
The following is an excerpt from the new book Raising the Floor by Andy Stern with Lee Kravitz (Public Affairs, 2016):
At first blush it seems almost un-American—a universal basic income (UBI) that grants an income to every US citizen without any obligation to work or perform a socially mandated task. In a country that celebrates hard work as the path to fulfillment and riches, the idea of getting money for nothing—even if it’s just enough to keep you and your family off the debt collector’s call list and above the poverty line—is heresy. And yet, in some ways, UBI is as idealistic, optimistic, and American as the Declaration of Independence and its foundational principle that “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
Even with our current economic problems, we live in a land of abundant wealth and resources. And UBI is rooted in the belief that every human being should have at least the basic means to choose the life they want for themselves and their families. At a time when the tried-and-true twentieth-century solutions are failing us, UBI has the potential to give our troubled economy a twenty-first-century shot in the arm by transforming the technological disruption that’s been causing us so much anxiety into a force for self-fulfillment and the common good.
If these sentiments sound lofty and gilded, as I’m sure they do, my hope is that the conversations here will inspire you to see UBI as a policy that can raise the floor and reinvigorate our nation’s founding principles while providing new scaffolding for the American Dream.
Why Now, America
The idea of a basic income has been around for hundreds of years. And for the most part, it has remained just that: an idea. So why do I think it’s time to have a very serious conversation in this country about making a universal basic income a reality in twenty-first century America? Because as we move from an industrial economy to one based on digitization, our economic system is irreparably breaking down.
I’m emboldened in that statement from a conversation I had with Albert Wenger, the managing partner of Union Square Ventures, a New York-based venture capital firm best known for its early investments in Zynga, Tumblr, Twitter, and Etsy. Wenger has founded or co-founded tech companies in the areas of data analysis, investment, and management consulting. He has degrees in computer science and economics from Harvard, and a PhD in information technology from MIT. He spends a lot of his time thinking about how technology will change the workplace, and here’s how he explained the fundamental loop of the industrial economy to me—and why it is breaking down: “In the industrial economy most people have a job and sell their time for a wage, then they use that money to buy products and services that are produced, for the most part, by other people who are selling their time. That fundamental loop is breaking down because we can make more and more things without people. It’s not a matter of ‘This will happen.’ It’s already happening, as we can see everywhere in the data”—and as I’ve noted several times earlier in this book.
Technology will keep making us more productive and efficient, but with fewer people. It’s impossible to predict exact numbers and there is no timetable for the transition from the industrial economy to the one that’s taking shape. “But one thing’s for sure,” investment banker Steven Berkenfeld says. “The transition will be a mess.” As Berkenfeld points out, the poor, the marginalized, and lower- and middle-income families will bear most of the transitional pain. The rich, less so. This becomes evident when I ask Berkenfeld to imagine what would happen if his own son, who is twenty-two, was suddenly to lose his job as a management consultant, or if that job became part-time or was turned into piecework.
“Well, I would have to cover his medical insurance,” Berkenfeld says. “And I would need to take into account that he won’t be making any money when we go on our family vacation, since he’s only getting paid for the days he works. Right now, I guarantee the $2,000-a-month lease on his apartment. If he lost his job, he’d probably have to move back home with us. Everything would change. He’d be much more dependent on us.”
Of course, everything would not change for the Berkenfeld family. Berkenfeld and his wife might be inconvenienced for a while, but their son would come out fine in the end, as would my own son, Matt, if he lost his job. Young people like them have a safety net with deep pockets—their parents. And they are born with a particular type of guaranteed basic income—the parental basic income, what I call PBI.
Also, parents with financial means give these kids a foot up in the job market. “If you’re rich and connected, your kid will be able to work for you or one of your friends or use one of the connections you have,” Berkenfeld says. “It’s children from middle-income and lower-income families who won’t have similar options.”
I am very concerned about the social safety net for workers. Historically, benefits came with a full-time job and membership in a union. It was the union that negotiated healthcare, workers’ comp, sick leave, and other benefits on behalf of its members, and those benefits helped workers and their families lead a more secure middle-class life. But now, with unions and benefits both falling away, American workers are more vulnerable if they get sick or hurt on the job. “We need a new social contract,” says Saket Soni, Executive Director of the National Guestworker Alliance and the New Orleans Workers’ Center for Racial Justice. “And we need a new mechanism for people to update the social contract.”
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 toward 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 (at the top/winner take all), 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.
You have to be employed to benefit from policies like raising the earned income tax credit or the minimum wage. If you’re unemployed, a higher EITC won’t put any extra money in your pocket. If you’re working part-time, a higher minimum wage will add to your total income for the hours you work, but you’re vulnerable to getting your hours cut. When you work hourly for pennies as an Amazon Mechanical Turk, no one will be paying you for sick leave. Nor will anyone be giving you sick leave, unemployment insurance, or a pension if you’ve been forced to become self-employed or an entrepreneur because you’ve lost your full-time job, or even if you’ve freely and happily chosen that path.
Ours is a consumer-driven economy: How can it even function, much less thrive if so many fewer people have money to spend? Technological unemployment threatens our economy, and also our American way of life. An underclass of youth without hope and jobs is capable of becoming violent and spawning terrorists. For all these reasons, technological unemployment is a national security issue.
Steven Berkenfeld joins me in thinking that we need to take a lesson from the way the military deals with contingencies: “If this were the military, the generals would have different scenarios for what they’d do if 5 percent, 10 percent, or 40 percent of the workforce faced a jobless future.” The military prepares for every possibility. Let’s follow their example and bring together a group of economists, policy-makers, futurists, politicians, business leaders, labor organizers, and everyday Americans to hash out a realistic plan for UBI, even if we never execute the plan.
After years of focusing on creating more middle-class jobs and raising wages, I find myself drawn to a policy that gives every American over the age of eighteen a basic income without any work requirement. 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.
Let’s begin with UBI’s historically biggest selling point.
UBI Gives Workers More Freedom and Choices
I ask Albert Wenger, the venture capitalist, if he’s afraid that his colleagues on Wall Street will label him a socialist because he supports a universal basic income.
“Not in the least,” he laughs. “If anything, UBI makes markets work better.”
I ask him how.
"For one thing, it gives all the participants in the market real options. Right now, too many people in the labor market don’t have options. As a result, we need crutches like the minimum wage and unemployment insurance, and we end up regulating the market in a way that discourages activity.” He is on the same page here with labor organizer Saket Soni who believes that UBI “would free people, presumably, to make decisions, rather than force them into deeper competition to hang onto jobs.”
UBI would also increase workers’ bargaining power. The ability to say, “Pay me a lot more than that, if not I’ll stay home” gives workers tremendous leverage in the face of abusive employers, bad workplace conditions, and inadequate wages. That increased leverage should have a positive impact on the wages of people who are unskilled and semi-skilled since they will face less competition from workers forced by financial necessity to seek jobs they don’t want.
UBI is a game-changer for labor. As basic income advocate Timothy Roscoe Carter points out: “In any negotiation, a person who can walk away from a deal can always exploit a person who cannot. Capitalists can always walk away from labor, because they can just live off of the capital they would otherwise invest. It will never be fair until labor can just walk away. A basic income is the ultimate permanent strike fund.”
And UBI provides options by enabling workers to move their families to a place where there are better jobs, giving poor and middle-class Americans more of the same kind of choices available to those with higher incomes. Economic handcuffs and fear of poverty limit Americans’ choice of employer, and their ability to leave crappy jobs, start a new career, work fewer hours, take time with their family, get healthy, start a business, go back to school, or search for a new line of work. That choice, that freedom, exists today, but only for the extremely wealthy and their families.
As Wenger says, “UBI will enable people to do a lot of things financially that are impossible right now.” He gives the example of a young person who is barely getting by in New York. During the past three years, the city of Detroit has been selling houses in some of its more run-down areas for $500 if the buyer is willing to rehab the house and help revitalize the neighborhood. It’s a fabulous opportunity for resourceful and adventurous young people, and for couples who don’t otherwise have the means to buy a house and start a family. But that young person in New York can’t take advantage of this amazing offer. Why? Because he doesn’t have the money to get to Detroit. And, once he gets there, he won’t have a job to pay for his food and other basic expenses. “We have these weird cycles where people get trapped in places that are too expensive for them,” Wenger says. “A universal basic income will help change that. It will let people move to places they can afford, where they can live a better life.”
In addition to giving people more freedom and choices, UBI will enable them to become more financially independent, making it less likely for people to get manipulated by someone else who controls their finances. People in abusive relationships will be able to escape them more easily. And women, now less financially dependent on their husband’s income, will be freer to pursue their own financial goals.
Like Wenger, Carl Camden, the CEO of Kelly Services, sees UBI as unleashing a flow of new economic activity. “When a highly compensated guy like me generates another million dollars of income, most of that money will go to savings,” he says. “But if you give that million dollars to people who make relatively little or nothing at all, almost all of the money will be spent. It reenters the system immediately, with velocity, which is what you want in a government program.”
Economists also point to the “multiplier effect.” Every extra dollar going into the pockets of low-wage workers adds about $1.21 to the national economy. Every extra dollar going into the pockets of a high-income American, by contrast, only adds about 39 cents to the GDP. That’s because the richer person can fulfill more of their more important needs and wants with the rest of their money than the poorer person can. By transferring money from high earners to low and middle earners, where the effects of spending are amplified, UBI will have a major ripple effect on the entire economy.
UBI will help the economy in a second way: it might seem counter intuitive, but a UBI applied in a “fewer jobs future” would enable a broader range of people to take bigger career risks, and to put their energies into activities that drive new types of “work,” new sources for income, and new inventions. In an article in Quartz magazine titled “Entrepreneurs don’t have a special gene for risk—they come from families with money,” business journalist Aimee Groth summarizes new research analyzing the shared traits of entrepreneurs. She notes, “the most common shared trait among entrepreneurs is access to financial capital—family money, an inheritance, or a pedigree and connections that allow for access to financial stability. While it seems that entrepreneurs tend to have an admirable penchant for risk, it’s usually that access to money, which allows them to take risks. And this is a key advantage: When basic needs are met, it’s easier to be creative; when you know you have a safety net, you are more willing to take risks.”