Universal Basic Income: The Recipe For Failure

About a year ago, I wrote a blog post criticizing Mark Zuckerberg’s 2017 Harvard Commencement speech.  At the time, I wrote:

Zuck says that students today can’t be entrepreneurial and take risks and have a sense of purpose because they don’t have a system to fall back on. 

 He wants a guaranteed minimum income.

In Zuck’s mind, the guaranteed minimum income would allow you to achieve a new civil right—the right to have a sense of purpose. 

Yep.  Get the rest of us to give you an income so that you can explore your interests and dreams.

Well, Zuckerberg isn’t the only uber-rich guy to think that Universal Basic Income (UBI) is a good idea.  Richard Branson, founder of Virgin (music, airlines, private islands in the Caribbean, etc) also thinks that giving people a survival level of income would go a long way to reducing stress levels.

Zuck picked up on the idea of the UBI when he was in Alaska last year and he found out that every resident of Alaska gets $1022 from the state government.  This money comes out of the state’s annual oil revenues.  It’s not a basic income per se, it’s more like a dividend that shareholders see.  In this case, the owners of the resource are the citizens of the State of Alaska, so, it’s only natural that they should see some benefit from the exploitation of that resource.

The Alaskan dividend is open only to qualified residents.  According to Alaska’s state rules that means you have to have lived within the state for a full calendar year (January 1 – December 31), and intend to remain an Alaska resident indefinitely. If you set up shot in the Great North in May, your "calendar year" wouldn't start until next January 1.

However, an individual is not eligible for a when:

  • (1) during the qualifying year, the individual was sentenced as a result of conviction in this state of a felony;

  • (2) during all or part of the qualifying year, the individual was incarcerated as a result of the conviction in this state of a

  • (A) felony; or

  • (B) misdemeanor if the individual has been convicted of

  • (i) a prior felony as defined in AS 11.81.900 ; or

  • (ii) two or more prior misdemeanors as defined in AS 11.81.900

In short, Alaska has rules about who gets the money.  That’s not what Zuck and Richard Branson are talking about.

Some places have decided to start an experiment with UBI.  The thinking within the governments of those places is that, since people will have a level of income that pretty much guarantees survival, they will be able to take time to choose the job they want, and just reduce their overall stress of existence.

Contrarians to the “survival income” argument say a UBI will encourage sloth, recipients will spend the extra dough on vices, and that this is just an expansion of the welfare state.  Most sane people who think UBI is a bad idea, always hit on “who, exactly, is going to pay for it?”

Well, in the case of Stockton, CA and Kenya some super rich guys are, at least for now.

In Stockton, CA, the young, feel-good story mayor (grew up poor, educated at Stanford, interned with the Obama Whitehouse, ran for city council as soon as he graduated, etc) Michael Tubbs (wait…wasn’t that the name of a character on Miami Vice?), has decided to experiment with donated money on a UBI program.  He wants to give a few dozen of the poorest families $500 a month, no strings attached.  This makes it different from a traditional welfare program.

The charitable donation making this experiment possible comes from the Economic Security Project. This is an organization founded by Facebook co-founder, Chris Hughes, Harvard Law professor, Yochai Benkler, Black Lives Matter co-founder Alicia Garza, and more than 100 other activists, researches, and technologists.  The project which has already scored over $20 million in donations, is designed to go out and test the efficacy of UBI.

I think this is a great idea.  Stockton, CA is going to test out whether or not giving poor families an extra $500 month will help them (probably).  At the end of the 18 month project, then a decision will be made to expand it to all poor residents of Stockton, because the experiment worked so well.  But who’s going to pay for that?  I can almost guarantee you it won’t be the Economic Security Project.

Stockton’s 100 family experiment is funded for about 18 months.  What happens when you look at conditions on a much longer scale?

Kenya is the laboratory for this pilot.  In Kenya, GiveDirectly, a charity founded by Segovia founder Michael Faye, and Paul Niehaus, a Harvard-educated professor, are providing the funds to give a basic level of income to a few dozen residents in rural Kenya.  And they’ve funded it for 12 years.

Twelve years.  That’s long enough to get people used to the extra $22 a month. 

To be fair, most of the people who are receiving the $22 are using for good things—one guy uses it to send his son to school.  Another woman invests a portion of it in her business selling second hand clothes.

The Kenyan experiment differs from Stockton in one very important way.  Unlike Stockton, where the money will be given with no strings attached, GiveDirectly is extremely involved with the villagers who get the UBI.  In fact, they are so involved that there is DAILY reporting and contact.  Now, how many people do you think are going to gamble their money away or spend it on booze and ciggies if you have to make a report every single day?

Stockton’s and Kenya’s experiments are the result of charitable donation.  I’m all for that.  If a charity wants to spend the money of its voluntary donors in this way, then I am absolutely all for it.  But what about when the taxpayers actually pay for it from the beginning?

In Finland, the government decided to do a UBI experiment with taxpayer money.  2000 unemployed Finns were randomly selected to receive about $685 per month. The thinking behind the two year pilot, which began in January 2017, was to provide an incentive for the unemployed to step into the job market, even if it meant taking on part-time or badly paid work. The other goal was to simplify Finland’s complex system of housing, child-care and other benefits by replacing them with the lump sum payment.

Well, apparently, the experiment is not turning out as planned. Finland will not be renewing the experiment beyond the end of 2018.  It seems that providing a basic income, just encouraged Finns to smoke cigarettes and sit in the sauna.

Go figure.  You mean if you remove the incentive to work, some people will choose not to work?

Wow!  The Pilgrims in Plymouth Colony could have told you that!  They tried that in 1620 and nearly starved to death.  When they gave up on that notion and encouraged people to work, they survived.

Supporters of UBI will even point to such renowned Libertarian economists like Milton Friedman, who supported UBI.  Maybe.  What Friedman supported was getting rid of all the rest of the social programs first.

But that probably won’t be a recommendation when the UBI experiments are studied.  No, my guess is that GiveDirectly and the Economic Security Project will say that everyone should get a UBI.  Because the results were so amazing! Less stress! More time for self-actualization!

Except they won’t tell you who’s going to pay for all this goodness. And that person is…you.  Caveat emptor.

 

Find me on Twitter @janevonmises

 

The Pursuit of Happiness

The Pursuit of Happiness

Ken Webster Jr is a talk radio personality and producer from Houston, TX. He started his career in Chicago on the Mancow show and has since worked at dozens of radio stations all over the country. He’s currently the host of Pursuit of Happiness... Read more

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