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Why I'm a Basic Income Advocate

Karl T. Muth - 8th August 2016
basic income, minimum income, policy, public policy, welfare, benefits

Karl Muth explains why basic incomes should transcend typical left right divides.

It isn’t obvious to most of my colleagues and friends why, during the past ten years, I (and others from both the right and left ends of the political spectrum) have become such an advocate for the basic income. So, allow me to explain (from my right-of-centre, graduate-of-the-University-of-Chicago viewpoint).

To be clear, a basic income, for the purpose of this discussion, is an amount paid from the public purse to any person on the basis of general limitations. For instance, perhaps it is only paid to people over the age of eighteen or only people who can prove they are citizens of the nation in question. Most importantly, it is paid whether or not the person is employed and is completely decoupled from employment – in other words, you get $20,000 (an example amount in a hypothetical scheme) each year on January 1 simply for proving you are alive (to prevent fraud) and a resident of the country in which you reside. Should you wish you have more than $20,000 per year in income, that’s fantastic and you’re welcome to work for (taxable) wages above and beyond the basic amount.

Implementing such a plan achieves at least four things in my view, some of which are philosophical and some of which are practical.

First, it conforms to my liberal view (liberal in the classical, Chicago School sense) that the person best-situated to allocate his or her limited supply of capital is the person him- or herself: Hence, we should give money rather than limited benefits or coupons that can only be spent on food, shelter, or other specific categories. American “food stamps” (often called SNAP benefits) and similar programmes are costly to administrate, limiting for recipients, and less economically efficient.

Second, it removes the stigma of receiving government money. While this stigma is lessened in some Asian and Nordic countries due to cultural factors and histories of benign and thoughtful government assistance, there is an Anglo-American (and, to a slightly lesser degree, Continental) disdain for government benefits. The stereotypes in America of the welfare queens, or in Britain of the layabout drunks on the dole, have real effects on citizens’ interactions with government, fellow citizens, and the labour market.

Third, it encourages entrepreneurship and the exploration of new ideas. Many students in my courses like Innovation Management tell me they’d like to start businesses but simply can’t because, between school and their jobs as baristas or food service workers or dog walkers they don’t have time or energy to make a go of it. Young people are excited, entrepreneurial, and risk-taking but these positive attributes are neutered by their need for basic income for groceries and housing.

Fourth, it helps cultivate human capital and skill-building. We live in a society where, only fifty years ago, it was common for a man to have one or two jobs in his entire career and common for women to not work. Today, it is common for both men and women to work, to live two to three decades longer than their grandparents did, and to change not only jobs but careers multiple times. Basic income allows people to re-skill less painfully mid-career as lower-income jobs are automated.

Interestingly, in both America and Britain, basic income finds supporters among the right and the left. It is the political middle that is most resistant, often citing stereotypes and anecdotes of the lazy impoverished man whose only skill is signing his name whilst cashing benefit cheques. As someone who is analytically-minded, I find these anecdotal and naked-of-evidence assumptions about how people would behave annoying and even offensive.

Perhaps, as with the GI Bill (in America)’s leading to other initiatives regarding public funding for higher education, by beginning with a particularly sympathetic group (recent war veterans after WWII in the case of the GI Bill), the implementation of basic income will need to begin with only a segment of the population. This is unfortunate, but may be necessary politically. If we are to begin with only a subset of the total population, then Owen Smith’s proposal to begin with those 25 and younger is as good an arbitrary choice as any.

But, eventually, there is no reason we cannot meet the basic needs of every person – working and not – and thereby allow people to pursue the jobs, entrepreneurial pursuits, knowledge, and adventures that they are capable of enjoying. The cost of any other strategy is simply too high and the current policies are simply too inefficient, too unattractive, and too punitive while having little or no relationship to actual empirical evidence on how labour markets work or how consumers allocate their resources.