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A Beta Test for a Universal Basic Income — An Intro to Dependency Culture?

UPDATED January 21, 2019 04:03 am .


Francis Cordor
January 21, 2019 04:03 am

There’s been a lot of talk lately about the future of work and what to do about it. Technology has already changed how we work — or don’t work for that matter. Online travel booking sites eliminated the need for travel agents about 15 years ago, and robots have been performing assembly line tasks since 1961 when General Motors installed a robotic arm on its assembly line. Self-driving cars, trucks, and shuttles will put many professional drivers out of work in the near future.

Remember the push by fast food workers for a $15 minimum wage a few months back? Wendy’s just announced that it’s adding self-service ordering kiosks to its restaurants this year in a move that will likely require fewer cashiers.

Silicon Valley is well aware of the impact innovations like self-driving cars will have on the need for labor. Whether floated as a potential solution or as a form of philanthropy, the concept of a universal basic income has generated a lot of interest. In fact, one organization heavily backed by Silicon Valley, GiveDirectly, is beta testing a universal basic income across an entire community in Kenya. For 12 years, villagers will be given a basic income, unconditionally, to do with as they please.

What Exactly is a Universal Basic Income?

According to BasicIncome.org, “A basic income is a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement.”

To be considered a basic income, payments must be: regular, paid in cash (not vouchers or payments in-kind), paid to each individual (not a household), paid to everyone without means testing, and paid without conditions (no requirements to work or repay).

Though universal basic income, or UBI, is making headlines today, it’s not a new concept. BasicIncome.org suggests that Johannes Ludovicus Vives (1492-1540) “should be regarded as the true father of the idea of a guaranteed minimum income.” Vives’ address to the Mayor of Bruges in 1526, On the Assistance to the Poor, proposed an assistance scheme with the government responsible for securing a subsistence minimum to all of its residents.

Basic Income is a Simple Way to End Poverty — On Paper, That Is

A recent New York Times Article, The Future of Not Working, noted that Laurence Chandy and Brina Seidel of the Brookings Institution calculated that it would take just $66 billion to bring everyone around the globe above the poverty line. This figure is about half of what the world spends on foreign aid. What if we could end poverty and cut the world’s foreign aid budget in half at the same time? It sounds simple, doesn’t it?

Giving money to recipients unconditionally solves some of the problems with current aid practices. For example, some donations, while well-intentioned, often miss their mark. Mosquito nets and soccer balls have their place, but starving families can’t eat them.

Meanwhile, non-cash donations form the vast majority of all aid. Donors and institutions alike resist the idea of giving cash. There’s a certain “feel good” aspect to donating vaccinations, clean water, or farm animals to needy families whereas sending cash with no restrictions requires a leap of faith. What if recipients make poor choices? What if instead of using the money wisely, such as on vaccines or healthcare, they spend it on alcohol? For institutions with a mandate, such as HIV/AIDS prevention, giving cash directly to recipients simply doesn’t align with program goals and hinders them from serving their purpose.

The Kenya Experiment

GiveDirectly acknowledges the controversy surrounding a universal basic income — and the lack of evidence supporting it. In fact, the organization calls its Kenya basic income program “the largest experiment in history.”

Here’s how the Kenya program, or experiment, works:

  • It’s a randomized controlled experiment with an independent contractor
  • Four groups of villages will be compared. One group will receive long term basic income for 12 years. One group will receive short term basic income for 2 years. One group will receive lump sum payments equal to two years of basic income. One group will not receive any basic income.
  • Metrics include: risk-taking, economic status, time use, gender relations, and aspirations.

As of early March 2017, the Kenya experiment is 79 percent funded. Nearly $24 million (out of $30 million) has been raised so far — and the money is already flowing to recipients in Kenya.

The New York Times article details several compelling stories from the pilot program. Recipients have spent their incomes on everything from basic sustenance to a new roof, a goat, and entrepreneurial pursuits.

Encouraging entrepreneurship is certainly a silver lining to this program. For example, one recipient purchased fishing line to make nets and rent a fishing boat so he could catch fish to sell. This is the classic “teach a man to fish” proverb in action.

However, the question of whether a universal basic income will entrench recipients further into a culture of dependency begs an answer.

Foreign aid organizations have long wrestled with this question, which is why education, training, empowerment, and various conditions often accompany aid. Providing a regular, unconditional income runs counter to this. Without limits, some recipients are likely to make poor choices. Some won’t work. They won’t spend their cash on education, healthcare, healthy foods, or business startup expenses; they’ll spend it on drugs, bling, and whatever else catches their fancy.

However, even those who are doing their best to make good financial choices with their universal basic income are likely to come to depend on that money. We all do it. As our incomes rise, we become accustomed to that extra money coming in and increase our own standards of living. How many of us put a raise or cost of living adjustment into a savings accounts? The first month or so, it feels like a windfall, but within a few months, you’re suddenly living paycheck to paycheck once again — and you’re dependent upon that extra pay.

If, in a matter of months, you can’t imagine giving up a 3 percent raise, what do you think is going to happen 12 years from now when the Kenya experiment ends? Many of those villagers will be completely dependent on that income. Losing it will be devastating.

The damage from dependency takes many forms, and it occurs long before the money dries up. You’ve heard the phrase,

“Necessity is the mother of invention,”

right? What happens when you don’t need to provide for yourself? When you don’t need to get creative to make ends meet each month? When you’re content with the status quo? Nothing grows; not you, personally, and not the economy.

In the United States, many Native Americans have been receiving generous monthly incomes thanks to casino riches over the last dozen or so years. Though transformative, some Native American parents worry that their children have become complacent. While they have the money to send their kids to college, the kids lack the motivation to attend because they’re already set with a healthy income. They don’t see the point. Tribal leaders also worry about casino money’s effect on members as a form of dependency just like the old welfare checks they used to receive.

Conflicts are inevitable. Why does the fisherman live in a nicer house? It’s not fair! Neighbors won’t necessarily realize that he spent his basic income on fishing supplies, which in turn helped him to earn a larger income.

The Kenya experiment is a beta test for universal basic income. Silicon Valley and world leaders interested in evaluating UBI as an alternative to welfare programs and foreign aid will be watching to discover if a community-wide implementation of basic income lifts communities out of poverty or entrenches them into a culture of dependency.

 

Featured Image: Courtesy of the House Ways and Means Committee Staff, Using Congressional Research Service reports and other data. 

 








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