What Basic Income Will and Won’t Solve

Basic income advocates often talk about what a transformative impact universal basic income could have on society — but what issues and challenges will it actually solve? Jim and Owen share their thoughts on whether basic income is the solution to poverty, automation, wealth inequality, and more.

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Episode Transcript

Owen: Hello, and welcome to the Basic Income Podcast. I’m Owen Poindexter.

Jim: And I’m Jim Pugh. We are here with you today with a discussion episode.

Owen: So, we’re going to be going through a number of different high-level issues and asking ourselves and each other “does basic income solve that issue?”

Jim: I think this is something that we touch on often in conversations on basic income, covering what areas basic income might make a big difference in peoples lives, but Owen and I were talking and really thinking that there hasn’t been a clear discussion on, for specific areas: Is basic income actually the answer to this problem? Is it not the answer? Is it part of the answer? And so, we thought it could be good to just really talk that through in a number of different directions.

Owen: So, let’s jump in. First one. Jim, would you say basic income solves poverty?

Jim: I would say partially. What about you?

Owen: I said yes. Alright, you go ahead. [laughing]

Jim: The reason I would say partially is that I, when talking to people, I typically say, basic income solves absolute poverty. This idea that, I mean there are people out there who are in destitution, who can’t afford their basic needs, and that if they were getting unconditional cash every month, they could. And so, in that respect, yes.

The reason I said partially is because if you’re talking about actually eradicating poverty, I do think there’s more to it than just making sure that people can cover their needs on an ongoing basis. If you look at social work and what it means to have a pathway out of poverty, there are more steps to that. There’s understanding the language of the middle class. A great book that was recommended to me recently is “Bridges out of Poverty,” and it actually talks about some of the barriers that we don’t even realize are there a lot of the time.

And so, I think that I see basic income providing that floor, which is a necessary step to get out of poverty and to keep people from falling into destitution. But I actually think we will need more than that if we want to have everyone fully included in the economy.

Owen: Yeah, I guess I was thinking partly just on a strict definitional level. If you can get above the poverty line, you are technically out of poverty. But, going a little bit further than that, the sorts of effects you see with cash transfer programs are the resolving of the symptoms of poverty. People have better educational outcomes, better healthcare outcomes. So that starts to convince me that the problem is lack of cash and when you provide cash then, maybe not all your problems are solved, but the damage done by poverty itself starts to heal up.

Jim: Yeah, I think that’s a good point, and an important thing to note is, if we’re talking about multi-generational effects, then maybe basic income does solve it. Because if you know the children are growing up with enough money to cover basic needs, maybe that could be enough to break the cycle of intergenerational poverty on its own.

Owen: Yeah. And you do see some positive effects on long-term earnings just with some cash transfers, some cash stipends.

Jim: Alright. So next up on the list is wealth inequality. Owen, what say you?

Owen: I said it takes a little of the edge off, but no.

Jim: I also said no.

Owen: Yeah. What I mean by that is basically it helps deal with the lowest ends of poverty but unless you’re just doing a truly aggressive Robin Hood-style taxation system, the rich are still going to be super rich. The poor are still going to be pretty poor.

Jim: I think something that gets missed sometimes, both among basic advocates thinking that suddenly all that will somehow go away, and I think it’s also a big concern that people who are skeptical of the policy have, is that if the proponents are adopting that more utopian perspective on what it will accomplish, that we may miss what else we need to do in order to deal with the other issues in society.

But, yeah, if you look at the situation we’re in, it is what? Eight people in the world have as much as the bottom half together? Giving everyone basic income in no way, shape, or form is actually going to have mostly equal amounts.

But, I said no, but I do think it’s worth pointing out that the more we can provide people a pathway to inclusion in society, the more opportunities that we can be granted. And so, even if we’re not directly addressing wealth inequality, maybe we can be increasing economic mobility, which means that more people have a chance to accumulate wealth over time.

Owen: Yeah, and if you start to think about, “ok, well, why is wealth inequality bad?” And, I’m not going to jump down that rabbit hole, but yeah, some of that starts to get a little better. And we usually don’t talk about the more utopian dreams of basic income where it’s not just $12,000, but $25,000, $30,000, something like that, $30,000 a year per person, which feels far enough down the future that its not even worth talking about, but that’s maybe where you would start to say “ok, this is starting to solve wealth inequality.” But we’re focused on 12 or even less right now.

Alright, Jim, how about automation?

Jim: I’m going to say “partially.” I honestly debated between “no” and “partially,” because I think, we’ve talked about this before, but if we actually end up in a situation where most jobs have been automated, and there really isn’t enough work for everyone, just giving people enough cash to survive is not, nowhere near a sufficient solution.

That, again, it makes sure that people don’t starve, but work has been so central to giving meaning to peoples’ lives that we actually need to think about what are some other changes to the way we approach our lives. And this doesn’t necessarily have to come from the policy world but, if we’re in that world, there’s a lot of rethinking we’re going to have to do, and basic income, I think, is necessary, but it won’t be sufficient.

Owen: Yeah. I’m in the same place. And even beyond just finding meaning in your life, if your making whatever — $60,000 a year — maybe driving a truck, to use the classic example, and your job gets automated away, and you have trouble finding work, but you’ve got $12,000 a year, you’re not living the same life. And especially, let’s say you’re in your fifties and your job goes away and you’re having a hard time finding a new job, now we’re talking about living on a basic income indefinitely, and the amounts we talk about just aren’t sufficient to solve the problem.

I think it’s something. It’s better than nothing. That’s why I said partial. Right now, you get six months of unemployment and then your kind of on your own. So, it’s better than that, but it’s certainly not everything.

Jim: Next up on the list, we had “problems with the social safety net”.

Owen: So, I said partial, and that’ll require some more explanation, but what were you thinking?

Jim: I said, it depends, but you go first.

Owen: Yeah. This might be similar answers here. So, first of all, what problems are we referring to with the social safety net? There are the issues surrounding bureaucracy where maybe some people who qualify for various means-tested benefits don’t end up receiving them because they don’t know that they qualify or maybe they chose not to fill out the paperwork, or they’re made uncomfortable by the paperwork. And, then the paperwork itself creates a ton of bureaucracy that is not particularly helpful to society beyond creating this filter where some people get benefits and some people don’t.

And, then there’s the issue that whenever your means testing, you’re probably leaving out some people who are needy in the same way but aren’t receiving those benefits. And also, for some, there’s a work disincentive. As you earn more money, the benefits phase out and so there’s an effective tax on your earnings, at least for a while.

So, does basic income solve those? It could, but if you are just eliminating all those other programs and replacing them with a basic income, you’re probably creating a lot more problems and probably hurting a lot of the people who do benefit from those programs. Because for all the issues with things like the Earned Income Tax Credit and anything else you could think of, unemployment insurance, they do keep a lot of people out of poverty. They do a lot of the things that basic income is good for. And those are the people who are most in need.

So, yes, on one level basic income doesn’t have those issues, but it is not targeted, and so it’s maybe creating other issues that those programs address.

Jim: The reason I said depends, and I think, yeah, we share a lot of perspectives on this. I think very much the type of basic income you enact is going to matter a great deal on this front. We’ve talked about this before, but if you actually were pursuing a basic income that got rid of all the programs that we had today and just gave people cash, then no, that definitely does not solve it and perhaps makes it even worse just because some people you may leave far worse off than they are today.

If instead you had a basic income in addition or as a supplement to what we have now, providing that universal floor that really acts as a backbone, and again, it won’t solve absolutely every problem, but that could make a world of difference as far as actually ensuring that people are getting the support they need beyond what exists today.

Owen: I’m totally with you on that. I do think there are programs we might eventually think about cashing out down the road if they’re proven to be pretty much redundant with the basic income. But, I would want to see the evidence for that in reality as opposed to just what we think.

Jim: Let’s not start a discussion on getting rid of the social safety net until we actually have something clearly better.

Owen: Yeah. Right. Ok. So, Jim, does basic income solve healthcare?

Jim: Big fat no for me on this.

Owen: Yeah. Same.

Jim: Yeah, I don’t see too many proposals for it out there, but there are some people who have talked about basic income as a replacement, not only for a lot of the general means-tested programs that we have today, but also for all government assistance on healthcare. And I think that would be pretty disastrous. Why don’t you share your thoughts?

Owen: I’m pretty much in the same spot there. If healthcare was something where it was like your rent or something, where you just needed to pay a little bit on a regular basis, and it was predictable, and then you were good, healthcare was solved. Then ok, that’s kind of what we’re talking about here. But obviously healthcare’s nothing like that. It’s something where maybe you have your annual check-up, but it comes in big, giant spurts when you actually need it, and its unexpected, and you can’t really plan for it beyond having insurance.

Jim: Yeah. My perspective is that we really should be aiming for a single-payer system. We see with Medicare today, that’s actually an incredibly efficient government program. The overhead costs on that are very, very low, far lower than private insurance, and it’s actually providing people with quality healthcare. So, we already know something that works well here. And we see examples in other countries of how effective that can be, so rather than trying to fit a square peg into a round hole with using unconditional cash for this, let’s actually go with what works.

Owen: Right. And part of the reason that it works as well as it does, Medicare-For-All type systems, or Medicare itself, is that you have more bargaining power if you are the government. If your negotiating prescription drug prices say, and you represent millions and millions of patients, that’s excellent bargaining power. Whereas the more segmented it is, the higher those prices go.

The last one we have on the list: “does basic income solve housing affordability?

Jim: So I said, in some places.

Owen: I didn’t write down a simple answer to this. I said, probably more than it gets credit for but, I guess partial would be my one-word answer.

Jim: I think my perspective on this ties back to what we were talking about last week or two weeks ago around the dangers of inflation on basic income. I think if you could enact a basic income and knew that housing costs are the same, then it doesn’t solve it completely, but it makes a big difference.

I think the trick with housing is that you end up with such odd geographical effects. We see this first-hand here in the Bay Area because the housing supply is so much more limited than the demand is for it, and so you end up with these exorbitant rents. And you could imagine, basically it’s distorting the market, and so with a distorted market, it’s hard to know exactly what will happen.

And so maybe we would have some weird effects where prices could go up significantly if people were getting a basic income, but based on the evidence from the study that was run in Mexico that we talked about previously, when you do have a market for goods, it seems like providing people with extra cash doesn’t cause inflation. So, anywhere where you actually had enough supply and demand on both sides, probably that extra cash is going to really make a difference for people.

Owen: Right. I think some people assume if everyone gets $1,000, landlords just like en masse raise the rent $1,000, and they just soak it all up. And, yeah, you could imagine situations where that could happen. But I think, it’s not like there’s a big, I don’t know of a landlord secret society where they can all collude like that.

And so, yeah, if you’ve got a good market, I think you’re ok. In a crazy distorted market like the one we’re in, in the Bay Area, I think the forces that are causing that distortion are a lot bigger, in some cases, than the basic income would be, and so in some markets around here, I don’t think you’d really see it.

I think you’d really have to watch for it in limited-supply, low-income housing, where the people providing those have a sense of how much money their tenants are taking in on a regular basis and would be able to adjust based on that. So, I think you would need kind of some parallel laws around protecting those renters.

Jim: Alright. That was everything that we decided to cover for this episode. One thing that came to mind as we were talking through this is a quote from my colleague Sandhya Anantharaman, the other Co-Director at the Universal Income Project. She had said at a conference recently that “basic income doesn’t solve every problem, but it makes every problem easier to solve.”

I think there’s a lot of truth to that. I think that so much of what we’re struggling with in society, you can trace back at least aspects of it that stem from people being in absolute poverty. And basic income really does make a difference there.

Owen: Yeah, and that’s what I find most heartening about the research that we’ve seen from various basic income studies. It isn’t just, you’re out of abject poverty, but everything else is the same. You do see a lot of improvement in a lot of other fields. And you also see it in our answers which were partial to almost everything. “No” on healthcare. I said “yes” to poverty, but it’s sort of a modulated “yes”. So yeah, having a little more money makes a lot of life a lot easier. But you still have your life. You still have your problems.

Alright, thank you for listening to the Basic Income Podcast! Please subscribe on Apple Podcast or the service of your choice. Also, if you could take the time to leave us a rating or a review that helps other people find the podcast as well.

Thank you to our producer, Erick Davidson, and we’ll see you next week.

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