WHY NOT A UBI?

WHY NOT A UBI?

Michael Anthony Lewis 

Professor, Silberman School of Social Work at Hunter College

and the CUNY Graduate Center

Although I like the idea of a UBI, this series isn’t meant to discuss what I like or dislike. Instead, it’s meant to bring those up to speed who’re new to the idea. One of the main things UBI newbies might want to know is why many people oppose the proposal. This post is meant to cover the most common objections to UBI.

One of the first things opponents of UBI bring up is cost. This objection, as it pertains to the U.S., typically takes the following form. An estimate of the U.S. population is offered. This is then multiplied by the proposed level of basic income. The resulting product is then offered as the cost of implementing UBI. 

The U.S. population is about 330 million people (https://www.census.gov/popclock/). Suppose, for the sake of illustration, that we use Andrew Yang’s proposed amount of $12,000 per person, per year (although, Yang’s proposal didn’t cover children). Since 330 million people times $12,000 per person, per year is about $4 trillion dollars per year, $4 trillion dollars per year is the estimated cost of a UBI of that amount. A common response to this objection is that it overestimates the cost of UBI. This response is usually based on a distinction between the gross and net cost of a UBI. 

The $4 trillion dollars amount is the gross cost. The net cost is the cost which would result once we account for the fact that not all UBI recipients would be net recipients. Those who offer this counter objection typically discuss it within the context of a UBI implemented alongside a personal income tax (https://works.bepress.com/widerquist/75/). That is, even in a system where the UBI wouldn’t be taxed, all other income would be. Anyone, who received a UBI but who also paid a non-zero tax on other income wouldn’t be a net recipient of a full UBI. Instead, they’d receive the full UBI amount minus whatever they owed in income taxes. In fact, some would owe so much in income taxes that the difference between their UBIs and what they owed in taxes would be zero or negative. The net cost of a UBI would be the cost we’d face once we accounted for all this giving and taxing back of income. I should add that I’m ignoring the cost of administering a UBI. That’s because participants in the gross vs. net debate tend to ignore it as well. 

A number of objections to UBI have to do with what those who raise them call “work.” Although they typically use this term, what’s really meant is the sale of labor in return for a wage or salary. Economists call this “labor supply.” While discussing these objections, I’ll call it that too.

One labor supply related objection contends that a UBI would cause a reduction in such supply because people would have a source of income separate from how much labor they sold. A number of UBI proponents question this argument by pointing out that money isn’t the only thing which motivates people to sell labor. Non-pecuniary reasons for doing so may be enough for implementation of a UBI to result in little or no net reduction in labor supply (https://medium.com/basic-income/if-we-no-longer-force-people-to-work-to-meet-their-basic-needs-won-t-they-stop-working-3996442b7585).

Other UBI proponents agree that a UBI would reduce labor supply; they just don’t think that this would be a problem. They contend that currently we have an economy which requires most people to get most of their incomes from selling their labor. The result is an economy with a lot of unnecessary jobs, which only exist just to get cash to people. But the most efficient way to get cash to people is to just give it to them, whether or not they sell their labor. This, of course, is what a UBI would do, and it would result in a reduction in labor supply. But proponents of this argument say that that is just what we need. We should get rid of unnecessary jobs as well as automate the necessary ones which can be automated. Those remaining necessary jobs which couldn’t be automated would be done by humans. All of this would result in a more efficient macroeconomy (https://medium.com/@alexhowlett/introduction-to-consumer-monetary-theory-78905b0606ca).

Another labor supply related objection to UBI is what I call the “something for nothing” objection. It contends that giving “able-bodied” or “able-minded” adults money which they don’t have to sell their labor to receive is morally wrong, even if it wouldn’t result in a net reduction in labor supply. It just isn’t right, the argument goes, to give people “free money.” 

I’ve seen two main responses to this objection. One challenges the idea that folks who’d receive a UBI would do nothing. Some would devote more time to caring for those around them. Others would choose to spend more time in school. Some would spend more time pursuing artistic interests or other hobbies. All these activities would amount to doing something. 

The other response to the something for nothing objection is based on the claim that many able-bodied or able-minded adults in our society receive money which they don’t have to sell their labor to receive. For example, the descendants of wealthy relatives often receive free money through gifts or bequests. Such transfers could be eliminated by way of reforms in gift or estate taxes. Yet these reforms haven’t been enacted, and we don’t hear many folks complaining about inheritance being immoral because it allows rich kids to receive something for nothing. So why, UBI proponents argue, only bring up the something for nothing objection with respect to UBI?       

A third version of the labor supply objection to UBI starts with the premise that selling labor provides meaning and purpose in people’s lives. So, by discouraging the sale of labor, a UBI would discourage people from taking part in an activity which gives them meaning and purpose. This wouldn’t be good.

UBI proponents typically respond by claiming that people can get meaning and purpose from doing things other than selling their labor. Pursuing education, caring for loved ones, playing sports, pursuing artistic projects, and a host of other unpaid activities can provide meaning and purpose. So, even if a UBI did result in a net reduction in labor supply, that doesn’t mean it would also result in a net reduction in meaning and purpose in people’s lives.    

Another common objection to UBI is that it would cause inflation. That is, giving everyone, say, $12,000 per year would cause businesses to raise prices, eroding the value of the UBI. A common response to this objection is to argue that the UBI should be indexed to some measure of inflation (https://medium.com/basic-income/wouldnt-unconditional-basic-income-just-cause-massive-inflation-fe71d69f15e7). That is, every year the nominal value of the UBI should be increased, as the measure of inflation increased. 

Another, though related, response to the inflation objection is to argue that the value of the UBI should be in line with the economy’s productive capacity. If that capacity is low, the UBI should be set relatively low; if the economy’s productive capacity is high, the UBI should then be set relatively high. As long as UBI is calibrated this way, there shouldn’t be much inflation (https://medium.com/@alexhowlett/introduction-to-consumer-monetary-theory-78905b0606ca). 

Yet another frequently heard objection to UBI is that it’s badly targeted. This is due to its universality. Why, those concerned about UBI’s bad targeting ask, should we give a UBI to the likes of Jeff Bezos? He has enough money and clearly doesn’t need another $12,000 per year. Shouldn’t we focus only on those who need help? And isn’t this best done by a means-tested income support program? Recall that means-tested programs are those which require people’s income and asset levels to be below certain amounts in order to qualify.

UBI proponents usually respond to this objection by claiming that programs which target the poor are often poor programs. The equivocation on the word “poor” is deliberate. The claim is that a program which everyone benefits from is likely to have more built-in political support than one which targets just poor or low-income people. And this built-in political support will result in the program being both more generous and more stable. This response from UBI supporters may be true but, in a way, it’s also kind of misleading. 

Earlier when I was discussing the difference between the gross and net cost of a UBI, I said that some people would have part or all of their UBIs taxed back, since they’d owe taxes on their other incomes. Someone as wealthy as Jeff Bezos is likely to be such a person, although I realize that he might be able to afford some help avoiding payment of taxes. But the point still remains; some people would pay more in taxes than they’d receive in UBI. So, in effect, they wouldn’t be recipients of UBI. In other words, along with the gross vs. net cost distinction, there is a gross vs. net UBI recipient distinction. UBI is only universal in a gross sense; it isn’t in a net sense. 

There are other objections to UBI. The ones I’ve covered in this post are the most common ones. So, if you’re a UBI newbie, you should now have a decent understanding of why many people believe that UBI is a very bad idea.