What If Government Just Gave Everyone Cash, No Strings Attached?

The radical idea of a universal basic income is far from new, but it's finally being tested around the world -- even in America.
by | August 2017
Cash money flying in the air.
(Shutterstock)

Right now in Oakland, Calif., there’s a family getting $1,500 a month for doing, well, whatever it wants to do. This family, along with 99 others in the city, is receiving a monthly check without conditions of any kind. They can work, not work, travel, volunteer with a charity. They can spend it on food or rent or medicine -- or yoga classes or movies or bikes. It’s all part of a nascent effort to answer a question that’s on the minds of a lot of economists and social scientists and a growing number of public officials: Can giving people cash without any strings attached help lift them out of poverty?

This is universal basic income, the idea that everyone deserves a certain level of economic security -- and a regular paycheck -- regardless of their level of employment. While it remains a radical concept, it’s lately been getting a serious look from thought leaders and policymakers all over the globe. Prominent proponents range from Elon Musk and Mark Zuckerberg to Mark Muro of the Metropolitan Policy Program at the Brookings Institution, and former Labor Secretary Robert Reich, who has said that basic income is “inevitable.” Rutger Bregman, a Dutch historian, advocated for basic income at this year’s TED conference; his speech drew a standing ovation and has been viewed online by more than a million people since it was uploaded in May.

One of the biggest current advocates of universal basic income is Sam Altman, the president of the Silicon Valley incubator Y Combinator. Altman is personally funding the experiment in Oakland. The project has been running since January, and at this phase it’s only intended to help Y Combinator researchers fine-tune their methodology. Once the kinks are ironed out, Altman has said he wants to expand it to a full pilot project of a couple thousand families. “We should make it so no one is worried about how they’re going to pay for a place to live, no one has to worry about how they’re going to have enough to eat,” Altman told an audience in San Francisco this spring. “Just give people enough money to have a reasonable quality of life.”

That’s much easier said than done. A true universal basic income, or UBI, would be phenomenally expensive. And in any case, handing out a monthly paycheck to every low-income person is politically impossible right now, at least in the United States. But an increasing chorus of advocates argues that it’s an idea whose time has come. The economy is shifting in rapid and permanent ways, they say, and the social safety net that has developed over the past century can’t keep up. It’s time to rethink our entire approach to welfare, and to reconsider our very understanding of what it means to be poor. “Poverty is not a lack of character,” Bregman said in his TED talk. “Poverty is a lack of cash.”

The idea of a UBI -- or at least the idea of testing it to see how it might work -- is also gaining a little steam in the public sector. San Francisco is actively exploring several possible demonstration projects; the city last year proposed the nation’s first large-scale UBI program, although it hasn’t managed to secure funding. The National League of Cities has promoted UBI as one option local leaders should consider as they look to the future. The Canadian province of Ontario is launching a pilot project that will disperse a basic income to some 4,000 participants. Finland started a program in January; Scotland and the Netherlands are discussing projects of their own. A massive multiyear experiment, albeit a privately funded one, is underway in Kenya.

Hawaii this spring became the first U.S. state to endorse UBI as possible public policy. Under a new law passed unanimously by the legislature, the state officially recognizes “that all families in Hawaii deserve basic financial security and that it is in the public interest to ensure economic sustainability for our people.” What’s more, it requires several state agencies and offices to “identify and analyze options to ensure economic security, including a partial universal basic income, full universal basic income and other mechanisms.”

State Rep. Chris Lee, who sponsored the measure, says Hawaii has spent years debating how to deal with widening income inequality, rising homelessness and an increasing cost of living. One night on the website Reddit, he stumbled across a post on basic income, and the idea clicked: “It really was a broader idea which could potentially address all of those things.” His legislation, he says, is intended to “start a conversation about, what are our priorities and values here in our state?”

After all, say Lee and others, certain forms of UBI already exist in America. The Alaska Permanent Fund Dividend, which pays every state resident a cut of its oil revenues, is a type of basic income program. So is Social Security. So is the earned income tax credit, which augments wages for low-paid workers. It’s not irrational, therefore, to consider some version of the idea for the population as a whole.

Why the widespread surge of interest in giving away cash? One reason is robots. Specifically, the recognition that increased automation is radically restructuring the economy and resulting in ever fewer available jobs. Automated machinery has already decimated American farming and manufacturing employment. Travel agents are a relic; bank tellers, grocery clerks, retail salespeople and many other categories of service workers seem to be heading toward obsolescence.

The coming decades will bring more changes. Driverless vehicles could wipe out trucking industry jobs. Algorithms could replace accountants. A 2013 Oxford University study found 50 percent of jobs currently performed by humans could be taken over by machines in the next 10 to 20 years. Separately, a November 2015 study from McKinsey said that 45 percent of work activities could be automated using technology available right now, which would mean a loss of $2 trillion in annual wages in the U.S. It’s not just low-skill, low-wage jobs that are threatened, the McKinsey report said: “[E]ven the highest-paid occupations in the economy, such as financial managers, physicians and senior executives, including CEOs, have a significant amount of activity that can be automated.”

Thanks to other tech innovations, the very nature of “work” is already being redefined. In today’s gig economy, “working” for many people no longer means full employment at a single 40-hour-a-week job. It may be an inconsistent cobbling together of freelance jobs, Lyft shifts, TaskRabbit services and renting a room out on Airbnb a couple of nights a week. “The way that jobs are changing,” says Jim Pugh, a co-founder of the Universal Income Project, an advocacy group based in San Francisco, “there’s just not a pathway to full economic inclusion for a big percentage of our population today.” It’s time for a paradigm shift, he says. “It is ingrained in people that you should be able to make ends meet if you’re working. But we’re seeing a shift to the idea that being able to meet your basic needs is a right.”

 

There may be new interest in universal income, but the idea is at least five centuries old. Thomas More suggested in his 1516 book Utopia that providing everyone “with some means of livelihood” might be the most effective way to end theft. Four hundred years later, Bertrand Russell declared that “a certain small income, sufficient for necessities, should be secured for all, whether they work or not.”

In the mid-20th century, a diverse constituency developed around the idea that government should ensure everyone a minimum income. Huey Long was preparing to run for president on a UBI platform before he was assassinated in 1935. Martin Luther King Jr. was a major proponent of the concept. Conservatives were fans as well. In 1962, the libertarian economist Milton Friedman advocated what he called a “negative income tax,” which was essentially a UBI. For Friedman, it was a fairer, simpler, more transparent way to redistribute tax revenue than an overlapping web of safety-net programs run by government bureaucrats. “In the 1960s and ’70s, it was the kind of thing that crossed party lines,” says Karl Widerquist, an economist at Georgetown University in Qatar and a UBI advocate. “You had economists, futurists, welfare rights activists, policy wonks who wanted to make the welfare system work more efficiently. That was a real spark, when all these people realized they were talking about the same thing.”

The high-water mark came on Aug. 8, 1969, when President Richard Nixon announced in a live television broadcast that he was endorsing a national basic income program. “What I am proposing,” Nixon said, “is that the federal government build a foundation under the income of every American family with dependent children that cannot care for itself -- and wherever in America that family may live.” Nixon’s “Family Assistance Plan” was relatively modest, providing $1,600 a year for a family of four without any other income (about $10,700 today). It applied only to families with children, and it included work requirements for “employable” recipients. Nixon refused to call it universal income. But it was nevertheless a plan to replace existing welfare benefits with guaranteed payments that would ensure a minimum income for every family in America.

Nixon’s proposal breezed through the House, but it stalled in the Senate. Many Democrats said the payouts were too stingy and called for a more generous plan; they also objected to the work requirements. Conservatives balked at the tax increases that would have been required for an expanded plan. The measure died.

As the 1970s dragged on through Watergate, stagflation and oil shocks, interest in a basic income waned. By the end of the decade, the conversation on welfare had shifted and split into two warring camps: Conservatives wanted to cut social programs, liberals wanted to keep them. Low-income aid recipients became Ronald Reagan’s “welfare queens,” and the idea of a UBI withered on the vine. By the 1990s, Bill Clinton and other Democrats were pushing to end government “handouts” and reform welfare with an overarching goal of requiring people to work in order to receive benefits.

After Nixon, proposals for a basic income popped up at different times in different locations-- Denmark in the 1980s, for instance, and post-apartheid South Africa in the early ’90s. But for the most part, the discussion was confined to academic papers and a smattering of conferences in Europe. By 2004, there were some 20 national networks devoted to UBI, “but it was still very underground,” says Widerquist.

Then the global economy fell apart. “When the financial meltdown happened -- and the Arab Spring, the 99 Percent movement, the Occupy movement -- when all those things started happening, people weren’t looking to rebuild Lyndon Johnson’s welfare state,” Widerquist says. “They were looking for something different: another model, a better model that was really going to do something to address income inequality in a new way.” In 2011, both Switzerland and the European Union saw petition drives to put a UBI on the ballot. The EU effort didn’t make it to a vote. The Swiss effort did, but it was ultimately rejected at the polls. Nonetheless, both of those campaigns brought a great deal of attention to the idea of a basic income. And they introduced the concept to a new generation of leaders eager to explore bold ways to deal with poverty, wage gaps and the realization that a growing number of people are being left out of the world economy.

 

Amid the current buzz about basic income, it’s worth looking back to a few real-life experiments from a generation ago that shine a light on current pilot projects.

One was a series of four large-scale trials of Friedman’s negative income tax that took place in several different locales around the United States: an experiment in Pennsylvania and New Jersey; another in Iowa and North Carolina; a third in Gary, Ind.; and a fourth, the largest and most generous, in Seattle and Denver, where 4,800 families participated in a nine-year trial. In each of the pilots, which ran for various years between 1968 and 1982, myriad government program benefits were replaced with a single guaranteed payment for poor families that would diminish as earnings increased. The government wanted to study how recipients would react: Would they quit their jobs? Go back to school? Become better parents?

Frustratingly, the data from all four trials wasn’t collected or compiled in any consistent way; the final reports from Gary and from Seattle and Denver weren’t even widely published. The programs also suffered from initial reports that the negative income tax was fueling higher divorce rates among participants -- that the money was empowering women to leave their marriages. Later analysis by researchers in the 1980s showed the supposed divorce effect didn’t hold up to scrutiny. What researchers did find, however, was an effect on work habits. Recipients did reduce their participation in the labor market, but not in the ways that critics predicted. People didn’t quit their jobs in droves to lie on the couch all day. Rather, they tended to scale back their hours a little, an average of 7 percent among men and 17 percent among women.

But it’s a largely forgotten Canadian experiment that provides the world’s best look so far at how a basic income might affect society. For five years in the 1970s, the province of Manitoba conducted a minimum income project called Mincome. It took place in three different localities, but it’s one of those, the small prairie town of Dauphin, that stands out. That’s because Dauphin was a true “saturation site” -- there was no selection process. Anyone whose income fell below a certain level was eligible to receive the money. Basic income advocates like to refer to Dauphin as “the town that eliminated poverty.”

Research at the time showed a work effect somewhat similar to the findings from the American negative income tax experiments. A few primary breadwinners scaled back their work a little. Women scaled back more, especially new mothers who opted to stay at home longer with their babies. The third group to reduce its labor participation was teenage boys.

As with the American experiments, though, data collection from Mincome more or less fell apart. The conservative Canadian national government that came into office in the late 1970s showed little interest in a massive wealth redistribution program for the poor. A final report was never released. Reams of paper were boxed up and bounced around among government agencies until no one could remember where they were anymore. More than two decades later, a University of Manitoba economist named Evelyn Forget became interested in the Dauphin experiment, and decided to track down the data. She finally found it -- 1,800 boxes gathering dust in a National Archives warehouse in Winnipeg.  

Forget began analyzing the data and cross-referencing it with other records from Dauphin in the 1970s, including hospital records and school attendance data. She interviewed as many of the original participants as she could. What she found was that the Mincome project didn’t just have a work effect. There were other impacts as well. Hospitalizations fell 8.5 percent, and fewer people were visiting doctors. The strongest evidence was in mental health -- “things like depression, anxiety and so on,” Forget says today. When people didn’t have to worry about making ends meet, they were under less mental stress.

The other effect she found was “a nice little bubble in the high school completion rate” among teenage boys who cut back on their work hours. “Instead of leaving school at 16 and taking a full-time job,” she says, “they were completing high school, perhaps working part-time or not at all for another year or two. ... The kids who finished high school were much more likely to go on to college.”

Four decades later, a different Canadian province is seeking to build on the Mincome experience. The Ontario Basic Income Pilot is a $150 million, three-year program centered on three different localities. The 4,000 participants will receive modest payments -- up to about $17,000 a year for a single person -- while independent researchers monitor the outcomes. “I believe it is the responsibility of government to take a stand, play a role and do what it can -- do all it can -- to ensure that the people of Ontario are given every chance to thrive and achieve their potential during this period of change,” Premier Kathleen Wynne said in announcing the pilot in April. “We want to find out whether a basic income makes a positive difference in people’s lives.”

As the Ontario project makes plain, any permanent, widespread basic income project would carry an enormous price tag. Without significant increases in taxes, a UBI could actually increase poverty in most high-income countries, according to recent analysis by the Paris-based Organisation for Economic Co-operation and Development. The OECD looked at 35 member countries and calculated the result if each country took all the money it was spending on social welfare programs and spread it out in monthly “no strings” paychecks to everyone. Those paychecks, the OECD found, would leave recipients far below the poverty line. In order to fund a basic income that would actually lift people out of poverty, most countries would have to raise taxes drastically -- the same problem that doomed Nixon’s Family Assistance Plan.

Many economists and basic income advocates have taken issue with the OECD report. For one thing, it’s modeled on a true “universal” basic income, a flat-rate payment to every single working-age adult in the country, even high-income earners. That’s not the aim of most modern-day basic income proposals, which are targeted to low-income populations. Widerquist, the Georgetown economist, says the OECD analysis is “just wrong.” His own estimate is that, for the U.S., a basic income large enough to eliminate poverty would cost about $539 billion a year. That’s about one-fourth of what the country spends on entitlements right now. And if UBI meant fewer people would need food stamps and other sorts of government benefits, Widerquist says, “we can do it for even less.”

Still, it’s almost unimaginable to think that American political leaders, even those in the most progressive pockets of the country, would support the kinds of tax increases it would take to fund a truly meaningful UBI anytime soon. Even Widerquist acknowledges that, while interest in the subject has never been higher than it is today, it’s not the mainstream political issue it was in the 1960s. “Now,” he says, outside of a “small contingent of bleeding-heart libertarians” who support the idea, “this is clearly coming from the left.”

But this is exactly why now is the time, advocates insist, to test the theories of basic income -- to try to imagine the unimaginable. That’s the goal behind the Y Combinator project in Oakland, a pre-pilot that could grow into a demonstration effort offering insights into how people might react if they didn’t have to work to meet their basic needs. “Some people say, ‘Oh, this is, like, a radical idea,’” Elizabeth Rhodes, the research director for the Oakland project, said in a Q&A video earlier this year. “But if change continues to progress in the way that everyone predicts -- and already we have massive economic insecurity -- we need to start thinking about outside-the-box solutions and start researching them. If we need this data in 10 or 15 years, we have to start now.”