What is Basic Income?

What is Basic Income?

By: Daniel Steingold | May 28, 2016

A Brief History of Basic Income

Many of us who follow the news have probably heard of the term “basic income”, but the concept is rife with misconceptions.

One popular misconception is that basic income will necessarily come on top of other government-sanctioned benefits. Another is that it would cause hyperinflation, as it would ostensibly involve printing more money out of thin air.

The truth is that while basic income is a concept that hasn’t been able to extensively prove itself in the marketplace of ideas, it has long been debated as a possible solution for economic parity.

In Utopia, a seminal work of fiction published in 1516, the humanist philosopher Thomas More presented the notion of providing a minimum income to everyone, then an even further radical idea. One of the characters in More’s novel expresses his belief that sentencing thieves to death instead of providing them the financial means to not have to steal in the first place was something he saw to be silly.

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This character helped reveal More’s way of thinking: being poor was a motivation for stealing; no one would steal unless they had to, as their livelihood would be in jeopardy.

Over the centuries, many more philosophers would ponder the idea of a basic income in some form, including Thomas Paine, Charles Fourier, John Stuart Mill, and Bertrand Russell. In other words, it's by no means a new idea.

The Modern Idea of a Basic Income

The modern conception of a basic income often takes the form of a “universal basic income”, or UBI, which endows every citizen with a set, unconditional amount of money on a monthly basis.

Although not always, it usually replaces other social welfare measures in whole. This is an attractive proposition for those across the political spectrum, as it not only consolidates and leans a nation’s government— the state doesn’t have to have different departments for various disparate welfare programs— but helps eradicate poverty.

It is believed by some that the cost savings from the elimination of bureaucracy and social programs could actually make basic income a cheaper idea than its current alternatives. The Basic Income Earth Network, or BIEN, is one of the key believers in this idea.

While little serious talk has taken place in the United States about implementing a basic income, many countries and territories within Europe and beyond have begun to express openness to experimenting with it.

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Finland has indicated that in 2017 they intend to conduct a basic income experiment with 10,000 Finnish citizens. Their trial would provide these lucky individuals with 550 Euros a month, unconditionally, for a period of two years. For the Finns, it is seen as a needed experiment, as the country's social security system has been seen to be in need of significant simplification.

Four cities in the Netherlands are also planning to experiment with basic income. The most prominent city, Utrecht, plans to provide 250 of its citizens with the equivalent to $1,000 a month, testing for four distinct scenarios.

The first situation will provide the money without requiring employment, considered a pure version of basic income. The second situation will require individuals to engage in volunteer work in order to keep their full stipend. The third situation will give participants more money should they volunteer. And the final solution will give individuals money, but only should they refrain from paid work.

Switzerland could potentially have the most generous basic income out there, as they will vote by referendum on June 5th as to whether Swiss citizens should get a basic income of 2,500 Swiss francs a month— about $1,650 USD. At present, it appears as if with only 40 percent support, the referendum will not pass.

Canada's province of Ontario is planning its own basic income experiment, and has high hopes, particularly because a similar experiment in the cities of Dauphin and Winnipeg in Manitoba during the early 1970s led to good results. In that experiment, recipients displayed no general decrease in productivity, and there was an 8.5 percent decrease in hospital visits during its duration.

Lastly, entire tribes and villages within Kenya are going to be part of a trial on basic income conducted by the charity GiveDirectly, in conjunction with researchers from MIT. At least $30 million will be used to fund the experiment, and it hopes to answer a number of questions about the viability of a basic income.

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For example, will it encourage economic growth or diminish it? Would it encourage innovation, or cause people to become lazy? What will people do with their extra money and time?

The Kenyan experiment is expected to go on for at least 10 years.

How Academics and Public Figures Perceive a Basic Income

Basic income is a fairly radical idea for many, which has caused opinions on it to be fairly divisive. It is so divisive that it is common to find individuals within the same field, discipline, or industry to have drastically different opinions on whether it should be implemented.

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One prominent entrepreneur who has come out to support basic income is Sam Altman. Altman, the current President of Y Combinator, perhaps the largest and most influential business incubator, seems to have thought through the consequences of giving individuals free, no-strings-attached money.

Altman acknowledges that it’s a possibility that “90 percent of people will go smoke pot and play video games. But if 10 percent of the people go and create new products and services and new wealth, that’s still a huge net win.”

Altman has made it clear that the “ideal that hard work for its own sake is valuable, period, and you can’t question that, I think that’s just wrong.”

Evelyn Forget, an economist who helped implement and oversee the Manitoba basic income experiment, believes that eight hour work days and 40 work weeks are rather arbitrary. Work can provide meaning, but one doesn’t necessarily need to work a 9-to-5 job for this sense of fulfillment.

It is important to note that the hours in a typical workweek have been in a general downward trend over the past few decades. Furthermore, many countries that match or even outperform the U.S. economically, such as Germany and the Netherlands, employ shorter workweeks.

While most opponents of basic income have not been equally explicit in their condemnation of it, a primary concern has been that it will be too expensive. The thought is simple: without increasing social welfare expenditures on such a program, it would fare no better than any current program in place.

Another concern, which may have been somewhat discredited by the experiment in Manitoba, is the notion that such a program would rob Peter to pay Paul. In other words, it is income redistribution; even worse, it is income redistribution that cannot be controlled in the sense that the income is given unconditionally and can be spent on anything.

Despite naysayers, a number of prominent figures have come out in favor of basic income, or at least experimenting with it. The fact that technology will likely replace many jobs in the future, and that it is not necessary to have people work to the same extent that they do now, play major factors.

Job Displacement Propelling Basic Income

When it’s all said and done, basic income is such a lucrative idea in the minds of many because of job displacement. Many low-skill positions are almost certainly going to dwindle in terms of available jobs; the same will happen with even many white-collar workers.

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Jobs that could be included in this list include everyone from Uber drivers to baristas to financial advisors. Automation is said to be causing hundreds of jobs to disappear a day, and it is unclear as to whether these jobs can or will be replaced by anything else.

Many would argue that, if nothing else, it is probably a good idea to experiment with basic income now, instead of seeing tremendous job displacement eat away job prospects in the relatively near future.

Are you in support of basic income? What would you do differently if you had a safety net of income coming in every month? These are pertinent questions that may shape the future of economies and societies across the world.

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