Poverty, income volatility, job instability, and lack of social mobility are real problems in the US. While most Americans manage to climb the socioeconomic ladder to achieve a decent version of the American Dream, some get stuck on the lower rungs. They need help. In previous posts (here, here, and here), I proposed an Adult Student Basic Income (ASBI) that would effectively address these societal ills without diminishing labor market participation or labor productivity.
As an alternative to the Universal Basic Income, the ASBI would effectively address poverty, volatility of income, job instability, and insufficient social mobility without discouraging labor market participation* and at minimal expense to most taxpayers. This ASBI would provide $1000/month up to six years total (minimum one month at a time) for adults enrolled at least part-time in approved postsecondary training and education programs, from ESL classes to apprenticeships to graduate school. The benefit would not be means-tested, so recipients could work as much as they want without jeopardizing their ASBI payments. ASBI payments would stop if recipients failed to meet participation and performance requirements but payments could resume following a reinstatement process. See An Affordable Basic Income That Alleviates Poverty and Promotes Social Mobility for more details on the basic proposal.
The ASBI would mostly pay for itself through reduced spending on other government programs, such as Federal Student Loans, Supplemental Security Income (SSI), Social Security Disability Income (SSDI) , Temporary Assistance for Needy Families, Earned Income Tax Credit , and the Supplemental Nutrition Assistance Program. Pell Grants would be eliminated and many other safety-net programs would have smaller budgets because they are means-tested and anyone receiving an ASBI would either be ineligible for cash benefits or receive lower benefits from the other programs.
For example, the number of SSI and SSDI beneficiaries would likely go way down, because even part-time work jeopardizes eligibility for these benefits. The chance to earn more money would be an incentive to go for the ASBI instead of pursuing disability benefits, especially given that ASBI participation requirements would be compatible with many disabilities, e.g., flexible, self-paced online training with time spent on homework counting towards the overall time requirement. Having provided vocational counseling services to more than a thousand disabled adults, I'm fairly confident a good number of disabled people would be more interested in ASBI than in receiving disability benefits, not only because the ASBI is more generous than the average SSI/SSDI benefit but because recipients could supplement their ASBI with a little part-time work/occasional gig as their physical or psychological limitations allow.
According to the US Census Bureau, around 21 million adults attended college or vocational school in 2018. I’m going to more than double that number to the equivalent of 45 million full-time recipients a year for my ASBI budget. This estimate assumes a surge of new adult students and takes into account adult students not included the the Census Bureau figures, such as those enrolled in adult school or ESL classes. Note that the figure of 45 million year-round ASBI recipients has the same dollar value as 90 million half-year recipients.
Based on the equivalent of 45 million annual recipients, the ASBI would cost around $567 billion a year (45 million x $12,000 + 5% administration expenses). Unfortunately, “savings” from government programs downsized or eliminated as a result of the ASBI would not be enough to fund the entire $567 billion program. How to fund the balance?
In How to Pay for the Adult Student Basic Income, I estimated that $287 billion could come from funds released from existing programs being downsized, with the $280 billion balance funded through additional income taxes on affluent households. But that would require a pretty hefty tax increase on around a quarter of American households and might not be popular
Here’s another idea: why not combine the ASBI with healthcare spending reform? Several researchers have concluded that 20-25% of US healthcare spending is unnecessary. (See here, here, and here for details). That waste translates to around one trillion dollars a year. Mmmm. Now consider that almost half of 150 million US workers get health insurance through their employers and that private employers are currently spending an average of $20,000 a year on health insurance per employee. What if healthcare reform reduced the cost of employer healthcare benefits by 15%? That would translate to employers saving around $200 billion a year in benefits.
Why not implement a healthcare spending reform package that reduces employer healthcare benefit costs by at least 15% and then institute a new ASBI employer tax that collects about as much ASBI revenue as employers save thanks to healthcare spending reform? An employer ASBI tax actually makes sense, given that employers benefit directly from a skilled workforce. Plus, when coupled with healthcare spending reform, an ASBI tax would not increase the cost of doing business. A win-win proposition.
Here’s how such a funding scheme might look:
Looks pretty good to me. Not to mention much, much cheaper than a Universal Basic Income.
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* In previous posts (see links below), I identified several groups of US workers who might be tempted to stop working, reduce their working hours, or take longer breaks between jobs if they were to receive a guaranteed Universal Basic Income (UBI) of around $1000/month. These included rejected applicants for federal disability benefits, part-time workers, poorly educated prime-age workers stuck in low-paying jobs, twenty-somethings taking a few extra “gap years” before moving on to full-time serious work, workers near retirement age and rejected applicants for non-federal disability benefits, such as State Disability, Workers Compensation, and Long Term Disability. Again, see links below for evidence and elaboration.
Links:
Universal Basic Income: Effect on Labor Market Participation, Part I
Universal Basic Income: Effect on Labor Market Participation, Part II
Universal Basic Income: Effect on Full-Time Workers
Universal Basic Income and Part-Time Worker
Universal Basic Income: Lessons from Disability Benefit Programs, Part I
Universal Basic Income: Lessons from Disability Benefit Programs, Part II