What Economists Get Wrong About Universal Basic Income

UBI is ultimately a social and political tool, not just an economic one, and can be designed to address significant problems in ways no one is talking about.

Money in your pocket
Money in your pocket
Image Courtesy of Alexsander-777

Andrew Yang’s Presidential campaign has catapulted Universal Basic Income (UBI) into the public’s consciousness. While the idea has been gaining traction for years, in 2019 UBI is receiving mainstream coverage in the media. Yet too often the focus is on UBI as a purely economic tool, leading to it being presented as a fix to replace existing benefits, critiques that it devalues work, and even that it is a dangerous tool of big tech. In reality, UBI is a social and political tool that can be designed to serve a progressive rather than a dystopian agenda.

For progressives, UBI is not about replacing traditional welfare programs, but recognizing that as jobs are automated and wages are eroded economic support will need to expand beyond the most vulnerable, for whom existing programs are typically targeted. The reality is that newer tech companies (often vauled in the billions) generate fewer jobs than their traditional counterparts: for example, despite bringing in over a trillion dollars, Apple, Facebook and Google employ relatively few people when compared to their traditional non tech counterparts. Disrupters are also frequently economically destructive.

Slower job growth and automation are compounded by stagnant wages. Over the last few decades as wage growth has eroded, the American middle class has increasingly gone into debt to keep up. One in four Americans can’t cover an unexpected $400 expense. It now takes multiple adults in a household to earn what a single head of household brought in during the 1950s. UBI is seen as one way to address that stagnation.

Second, UBI is generally conceived of as small amounts of money that would supplement existing income. Yang’s Freedom Dividend proposes to give Americans $1,000 a month. An experiment being run in Stockton offers participants $500 a month. Generally, these monies are intended to supplement, and not wholly replace income. Most recipients still work, even if some do work fewer hours.

And working fewer hours is a good thing. Originally, it was speculated that technology would free up time for people. John Maynard Keynes predicted that his grandchildren would be working 15 hours a week. Speculation around why that hasn’t come to pass has primarily centered on psychology: people are competitive and want to work, or as they earn more the value of their work time is better compensated so they work more. The likelier explanation is the reality that wages haven’t kept pace with productivity gains (as this chart from the Economic Policy Institute shows):

UBI could help shift technological gains away from ever increasing productivity (which has not in fact been rewarded with increased wage growth), and instead finally help realize the long promised benefit of reduced working hours. It’s the type of social good that may go overlooked by economists, but there’s a good argument to be made that evaluating the impact of UBI on happiness and leisure, despite the hand wringing over its potential pernicious influence, has value.

All this is not to say that UBI isn’t without its significant potential problems, or that there is no role for economists in weighing in on UBI, but they shouldn’t be the sole voice or the primary analysis. Economists have been overly dominate of the American policy agenda for too long, and it’s beyond time to ensure that the social and political benefits of economic policy proposals also enter into the equation. Candidates like Warren and Sanders are pushing those concerns front and center, but these concerns need to become more central to the UBI debate itself.

As more jobs are automated, social unrest and income inequality will become increasingly pressing problems. UBI alone can’t and won’t be able to solve them, and may ultimately be a better fit for addressing the kinds of non-economic issues like work/life balance that get far less attention. But as the focus on UBI becomes a matter of policy debate, we should make sure we’re conscious of the fact that just like policy choices can shape markets, they can also shape what UBI looks like.

Written by

Xennial. Political news junkie. Feminist. Mom. I write about economics, technology and media. My views are my own.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store