Thank you for this piece. I’d like to add some commentary to it as it’s something I’ve been following for a while, especially since Finland’s announcement to experiment with Universal Basic Income (UBI) http://bit.ly/2lAq1bU.
Some good work in this area has been done by Nathan Keeble (http://bit.ly/2rGQQ1j) and Charles Hugh Smith (http://bit.ly/2qWAjFh).
Keeble argues UBI is similar to any welfare program in that it is simply a redistribution scheme. Wealth is taken from those who have it and given to those who don’t. This means that at some point on the income ladder, people must go from being net receivers of benefits to being net payers of benefits.
The progressive taxation that is necessary to finance a UBI means that the more a person earns, the higher percentage of their wealth will be taken from them. Furthermore, UBI does not do anything to reduce disincentives to work, in fact the opposite may occur.
Charles Hugh Smith highlights UBI’s flaws, including:
• Paying all 322 million Americans $10,000 a year would cost $3.22 trillion.
• A Universal Basic Income will add roughly $2.2 trillion to government spending, while profits and payrolls – the sources of tax revenues – will both decline.
• The only way to pay for another $2+ trillion in spending is to raise taxes or borrow it from our grandchildren – a proposal that is morally and fiscally bankrupt.
• Raising $2 trillion more in addition to the current federal tax revenues of $3.3 trillion and state/local taxes of $3+ trillion is a tall order. If the economy enters a profit and payroll recession, tax revenues will crater.
• Who will pay all this additional tax? If we say the remaining employed, that leads to this question: if much of your wage is being levied to support people who don't work, what's the motivation for working at all? Why not join the work-free crowd? And what happens when the most productive members of the workforce quit or decline to be productive?
• In sum, the psychology of punishing the productive and rewarding non-contributors is destructive to everyone.
Hugh Smith also raises the important point that being paid to do nothing does not provide meaningful work or positive social roles, which are the sources of positive identity, pride, purpose, community and meaning. The reality is communities that are given free housing, food and healthcare are breading grounds for self-destructive pathologies, depression, ill-health and unhappiness. He argues that work isn’t just a financial arrangement – it is a social arrangement and a source of individual pride and purpose.
Both authors make valid cases for dismissing UBI as wishful thinking. I personally believe that proponents of UBI are trying to solve 21st century problems with 20th century thinking. This ties in nicely with an article I wrote earlier this week http://bit.ly/2rGXrc4.
I made the argument that the advancement and deployment of technologies including robotics, artificial intelligence and blockchains will open up new opportunities allowing people to participate in meaningful work. This is not something that is properly addressed by UBI schemes and 20th century thinking. Blockchain technologies – such as Steemit – are part of a new economy, which is creating new money as a reward for creativity. In this new economy, everyone has the chance to be financially compensated for undertaking stimulating work rather than being paid for doing nothing.
Woah! That's a lot to digest... ok...