The movement to overhaul the American system of welfare and give everyone a monthly check has gained significant momentum in a wide variety of political circles, with proponents coming from both sides of the aisle. They claim that in this increasingly automated world, more and more jobs will be lost to technology, people will remain chronically unemployed without the skills or abilities necessary to sustain their own life. They claim that our welfare system, as it exists today will be unable to sustain these people who live without work. They may be right about this, but the fundamental ideas behind this convoluted idea are just dangerous. The movement I'm talking about, of course, is the one to establish a Universal Basic Income, or UBI for short.
The idea seems reasonable, a study done by the Oxford University found that 47 percent of American jobs are at high risk of "computerization", as used in their study. It also shows that wage level and educational attainment show a negative correlation with the probability of a job becoming automated. These findings only bolster the argument made by proponents of UBI. As jobs become increasingly insecure, as low-income jobs are lost to newer technology, as less skilled workers lose jobs in these crucial industries rises, what are we to do? There are many different views on exactly how to implement policies like this, but no matter the variation, at their core, they all believe that a UBI is the right step for America as we blindly move into the future of technology. I, however, stand against this solution, as the problem that they demand to fix isn't even upon us yet, and it would prove infeasible, hurting those it claims to be helping.
The strongest point against UBI is simply that it is not means tested. When something is means-tested, it means that there is a certain condition that has to be met in order to qualify for benefits. Our welfare programs are all means tested, and that is a good thing. The problem with infusing this cash directly into the American economy is not that we are infusing cash, rather is who we are giving the cash too. It is well documented that when poor to middle-class people are given money, they produce more economic output than if that same dollar was given to someone far richer, as much as 3 times as much.
The issue then becomes how to develop a functional system to adequately provide cash to the lower quintiles of the system and not to those in the upper quintile. Citing the Oxford University study, it is clear that the jobs held by the upper quintile earners are at significantly less risk than those in the lower quintiles because their wages are far higher and based more on investment rather than the typical salary model. Plus, they have significant educational attainment and have skills in leadership, engineering, research, development, etc. that would still be necessary in the dystopian future where enough work is destroyed to provide a substantial need for this program in the first place.
Giving those who already make a hefty amount would be simply unfair as it would cost Americans more in the long run by increasing federal spending but also reducing the amount of economic investment. There would have to be some degree of means testing in this UBI program but the proponents have not put forth any idea that would solve this problem. Making it unconditional also reduces the incentive to work. Back in the 60's and 70's when the ideas of Milton Friedman were held with such a vigor, many states adopted a similar policy of a negative income tax, which is a form of supplemental income until you reach a certain amount. In four random assignment experiments in six different states between the years of 1968 and 1980 they found that for every additional 1,000 dollars in supplements, real earnings dropped by $660. The destruction of the work incentive would actually hurt those who are poor because then they are relying on a barely passable $12,000 income without any additional income, but the constant cash flows would trick the mind into thinking that work would not be necessary.
Even further, most proponents of UBI propose eliminating social programs like social security and Medicare. In doing this, you are essentially taking money from disabled, elderly members of society and giving it to able-bodied adults who are less likely to have dependents. Social security gives more to it's recipients than the flat 12,000 dollars set forth in most plans for implementing UBI. By diverting funds from social security, and thereby reducing the income of elders, you significantly reduce the elderly's well being. One study done indicated that without social security, the elderly poverty rate would be as much as 40 percent.
And while they would still be receiving income, it would not be chained to inflation, like social security is, it would not be as high, it would not grow as you age, and it would not provide as much money to the most disadvantaged in our society. It would instead be giving money to able-bodied, able-minded youth and working class who are entirely able to support themselves through work. Proponents would counter with that these programs, and their spending, have grown and are unsustainable at current rates. This is true, but the proper conclusion to draw from that would be to reform them. Social security can be easily reformed to save lots of money in the future by raising the payroll tax cap currently placed at $127,200 to a much higher amount to incorporate more income earners, or to raise the early retirement age to adjust for a large increase in American longevity. Simple fixes in these institutions could save the government lots of money, the correct answer is to simply reform this so they can continue to provide the crucial services that they offer to thousands of Americans every day.
Moreover, the core principle of redistributing money to able-bodied, able-minded citizens is simply un-American. A poll taken by the heritage foundation found that about 92 percent of Americans disagree with the idea that able-bodied citizens should be supported by the taxpayer. Individuals capable of work should work, and they should provide benefit to society by being productive. As stated above, the UBI would destroy the incentive to work, thereby reducing the incentive to produce which would, over time, hurt the greater society. By supporting those capable of providing benefit to society, you destroy the possible production capacity of said workers. In effect, you are defying the long-standing idea of the social contract, in which those who can provide, do; in which those that can provide, provide for those who can't. So to does this policy remove certain important distinctions that our government makes among certain demographic groups by establishing a universal entitlement, which has serious implications for the general scope of government.
But to top off all of this, it would simply cost too much. A conservative estimate put $12,000 for all citizens at a price-tag of almost 3 trillion, which is most of our federal budget as is. In order to pay for this, significant taxes would have to be levied in order to fund these programs. This doesn't even take into account that a cash infusion of this scale, and the subsequent spending that would follow would lead to inflation, as the demand of goods would be shocked upward every time there was a new infusion, as Americans would spend most of their new found income. This is purely theoretical, but the basis for thinking it is rooted in simple macroeconomic analysis, and should be considered.
To alleviate this, they could shackle it to inflation, but that could end up costing more as they would have to spend more per person every consecutive year. Raising taxes enough to continue to fund this and other dire social programs would be necessary, but this idea is somewhat incongruent with the very idea of giving a basic income to all, as it would be decreasing the amount of income that they would be able to spend. It is true that taxes could be increased on the rich, but it is infeasible to suggest that the entire tax burden would be placed on them as they have way more lobbying power and influence in our government.
Lastly, this program would not create any actual wealth or encourage wealth to be created. Wealth is created through production. A program that slowly destroys production slowly destroys the ability to create wealth. Henry Hazlitt once noted that the only cure for poverty is production. Programs designed to better target those disadvantaged, poor, or at-risk jobs with job training, or simply with better education would be an ideal first step in helping our society move forward into the age of technology, not some convoluted plan advertised by Silicon Valley nut-jobs. There have been noteworthy failures in the past in developing programs like this, but substantial reforms in the Department of Education and in the way we think about schooling would better target the problem at hand.
In conclusion, UBI is just bad, infeasible policy that does nothing but reallocate funds from the disadvantaged in society to those who are completely able to work. It would hurt those that it was conceived to help, it defies the deeply embedded principles held in our society, and it does nothing to actually target the issue at hand. If anything it makes the issue worse. I urge people to move away from this policy moving forward as it is not the right answer to the looming problem of automation (which it is noteworthy that claims of automation taking jobs in the past has never actually manifested) only a contrived way to make tech giants feel good about themselves.