My local debate club recently held a debate about a specific Universal Basic Income (UBI) proposal. The motion: This House Supports a Basic Income for All US Residents

Motion Summary:  Basic income recipients would include children and adults; the employed and unemployed; and citizens, permanent residents, and all other residents who could prove a residency duration of at least three years. The amount given would start at $1,000 per person per month and be pegged to GDP growth going forward. No programs in the existing social safety would be replaced by this policy.

I was speaker against the motion. These posts expand upon my arguments against the proposed UBI. Long-story short: the UBI would bankrupt the government, destroy the economy, and cause labor market participation rates to plummet. At the debate, UBI advocates dismissed these predictions as overly speculative,  maintaining that possible risks could be managed.  Their main argument was that a generous UBI was called for because Americans are suffering and their situation will keep getting worse without a major overhaul of the social contract.  More specifically:  poverty, income volatility, job instability and stalled social mobility are a plague upon the country and the only cure is a universal basic income.

So let's look at these Four Horsemen of the Apocalypse:

Poverty:  It's important to distinguish chronic and transient poverty, because they have different causes and prognoses. Chronic poverty is usually the result of an ongoing disadvantage, such as illiteracy, and is tough to overcome (Kimberlin, 2013). Transient poverty often follows a specific event, such as job loss, and is usually resolved by another event (new job). Depending on the study and after controlling for government benefits and tax credits, between 2-3% of Americans experience chronic poverty (Kimberlin, 2016).  Transient poverty is much more common:  one study estimated 54% of Americans will experience poverty or near poverty at least once between the ages of 25 and 60 (Rank and Hirschl, 2015).

Volatility of Income: “Volatility” can be the good or the bad sort. The good sort includes things like getting a sales commission, performance bonus, extra payday, higher-than-expected tips, extra hours during the tourist season, and worker-requested flextime.  The bad kind of volatility is mostly due to  irregular working hours - a problem that is especially acute in service jobs like cook, janitor, waiter/waitress, maid, hairdresser, cashiers, and retail sales clerk.

Job Instability: Changing technology is expected to disrupt jobs and careers. Some occupations will disappear, while others will be created or transformed as job tasks evolve to complement new technologies. Workers who don't update their skills to meet changing labor market demands will be the most at risk for losing their jobs (Arntz, Gregory and Zierahn, 2016)

Lack of Social Mobility: The 11.6% of Americans over 25 without a high school diploma are less mobile and most likely to remain stuck in the lower income quintiles. Ditto high school graduates who lack basic job skills.  Consider, though, that at some point in their lifetimes:

  • 12% of Americans will reach the top 1 % of income earners
  • 39 % will spend time in the top 5 % of earners
  • 56 % will get into the top 10 %
  • 73 % will spend at least a year in the top 20 % of earners

These challenges - poverty, income volatility, job instability, and lack of social mobility - share one thing in common: they are mostly issues for specific subgroups and are not broad societal problems.  As such, they need solutions that target those subgroups - not some giant fix like the proposed Universal Basic Income.

Next: How to help the people who need the help.

References:

Arntz, M., T. Gregory and U. Zierahn (2016), “The Risk of Automation for Jobs in OECD Countries: A Comparative Analysis”, OECD Social, Employment and Migration Working Papers, No. 189, OECD Publishing, Paris. http://dx.doi.org/10.1787/5jlz9h56dvq7-en

Christensen, K. E., & Staines, G. L. (1990). Flextime: A viable solution to work/family conflict? Journal of Family Issues, 11, 455–476.

Kimberlin, Sara 2013. “Examining the Impact of Government Benefits on Chronic and Transient Poverty in the United States, 1998–2008.” Working Paper presented at the Association for Public Policy Analysis and Management.

Kimberlin, Sara "The Influence of Government Benefits and Taxes on Rates of Chronic and Transient Poverty in the United States," Social Service Review 90, no. 2 (June 2016): 185-234. https://doi.org/10.1086/687306

Presser, Harriet B. and  Cox, Amy G. The work schedules of low-educated American women and welfare reform Monthly Labor Review April 1997, 25-34. https://www.bls.gov/opub/mlr/1997/04/art3full.pdf

Rank, MR From Rags to Riches to Rags http://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-to-riches-to-rags.html?smid=pl-share&_r=3   

Rank MR, Hirschl TA (2015) The Likelihood of Experiencing Relative Poverty over the Life Course. PLOS ONE 10(7): 0133513. http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0133513

Ryan, CL Educational Attainment in the United States: 2015 https://www.census.gov/content/dam/Census/library/publications/2016/.../p20-578.pdf

Weathering Volatility: Big Data on the Financial Ups and Downs of U.S. Individuals May 2015… In fact, only 30% of individuals experienced a change in income of 5% or less between 2013 and 2014. https://www.jpmorganchase.com/corporate/institute/infographic-weathering-volatility.htm

https://www.census.gov/newsroom/press-releases/2017/educational-attainment-2017.html