Universal Basic Income After COVID-19

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Debate over basic income programs reignites amid the COVID-19 crisis.

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Last month, millions of Americans began seeing deposits in their bank accounts. Eligible individuals received up to $1,200 with an additional $500 for each qualifying child. 

Direct payment to individuals in the face of a looming economic crisis is familiar to some Americans. Alaska, for example, pays each inhabitant nearly $2,000 annually just for living in the state. During the Great Recession, certain individuals who were already beneficiaries of select federal programs received a one-time payment of $250. 

But the sheer cost and scope of the direct payments authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) has required an unprecedented level of effort and coordination. 

The stimulus checks have also reinvigorated debate in the United States about Universal Basic Income (UBI), a policy idea which, if implemented, would provide direct government payments to individuals regardless of need. The concept received attention during the Democratic presidential primaries, especially because candidate Andrew Yang made a so-called Freedom Dividend a key feature of his platform. 

Public support for a national universal basic income has grown significantly in the last decade, and recent studies indicate that Americans are now split with roughly equivalent support for and against UBI. Indeed, some scholars argue that the damage caused by COVID-19 has revealed a fragile and inequitable economy and that the recent one-time payment should become a regular feature to give everyone basic financial security going forward. 

Other scholars are less convinced, maintaining that partial or conditional UBI would not reduce poverty and inequality and that a system sufficiently generous to ensure a basic standard of living for all would be prohibitively expensive. These critics assert that it is more efficient for the government to invest in better quality public services and improve existing social welfare systems.  

A major source of division between opponents and proponents of UBI is the effect on work incentives. Would UBI encourage general apathy toward employment? Or would the impact on workplace participation be minimal?

One aspect of UBI that critics and supporters likely agree on is cost. Paying each American over the age of eighteen a guaranteed monthly income of $1,000 would, by one estimate, cost around $2.8 trillion a year. And even among UBI supporters, there is no consensus on where a government already running a large deficit would be able or willing to find the necessary funding. Some advocates, such as Andrew Yang, have proposed a higher capital gains tax supplemented with a value added tax to fund a federal UBI program. But some calculations suggest that even these funding measures might not provide enough resources. A cost-neutral plan exists but could require repealing programs such as Medicare and Social Security, as well as changing deductions and credits for individual taxes.

A further question centers on whether the need for UBI will increase with time. Specifically, is UBI the consequence of or a response to a world in which robots may increasingly come to replace portions of the workforce? A 2013 report from Oxford University indicates that nearly 50% of the entire U.S. workforce is at risk of losing their jobs from rising automation in the coming decades. Some observers, such as Bill Gates, see the rise in automation as an opportunity to raise government revenue through a robot tax, while others such as Elon Musk reportedly claim that UBI will be necessary to confront society’s inevitable technological dependency. 

This week’s Saturday Seminar focuses on the debate surrounding Universal Basic Income, as well as on how the coronavirus pandemic and CARES Act might alter public perceptions of UBI in the United States.

  • In an essay published in The Regulatory Review, staff writer Tim Yang examines Alice Fabre, Stephane Pallage, and Christian Zimmerman’s 2014 paper on whether UBI is more beneficial than unemployment insurance in addressing the impact of unemployment on the economy. According to Fabre and her coauthors, UBI programs may appear to be an easier solution, but unemployment insurance is ultimately more advantageous. Fabre and her coauthors argue that unemployment insurance can better tailor benefits to those who need them most, prevent increases in voluntary unemployment, and balance the costs of maintaining these support programs. 
  • Noting the popularity of the earned income tax credit (EITC), a refundable tax credit that often functions as a payment from the government, American University Washington College of Law professor Benjamin Leff argues for modifying the EITC to make it more “UBI-like.” In a recent article in the Washington and Lee Journal of Civil Rights and Social Justice, Leff proposes removing the EITC’s income-linked phase-out, making payments monthly instead of yearly, and increasing the size of these payments. “An expanded reformed EITC could provide a universal safety net that could capture many of the benefits of a UBI without the need to invent a bold new system seemingly out of nothing,” Leff asserts.
  • The technical aspects of UBI implementation are “essential elements” of a successful program, Miranda Fleischer of the University of San Diego Law School and Daniel Hemel of the University of Chicago Law School argue in a forthcoming article in the University of Chicago Law Review. Drawing on scholarly literature on taxation as well as ethical and political theory, Fleischer and Hemel contend that “the implementation of a UBI may prove to be the most important domestic policy endeavor of our time.” They identify six components that govern UBI implementation: size, eligibility, uniformity, assignability, payment mechanism, and funding mechanism. Although proponents of the present UBI movement disagree on the proper political and ethical treatment of these components, Fleischer and Hemel maintain that their analysis provides innovations that can unify the movement. Offering specific recommendations for design and outward framing, they argue that UBI “is not all-or-nothing.”
  • In an article in the Comparative Labor Law & Policy Journal, Brishen Rogers of Temple University Beasley School of Law argues against UBI, claiming that it is neither morally nor practically preferable to current social insurance and assistance systems. Rogers claims that the morality of social insurance, which hinges on individuals’ rights to a social minimum and their reciprocal obligations to society, is still compelling and more politically feasible than UBI. According to Rogers, current socioeconomic inequalities are a product of policies that disempower labor, and not the byproduct of a decline in manufacturing. Instead of UBI, Rogers advocates strengthening the social democratic welfare state by providing more robust benefits and facilitating labor market participation. 
  • Feminist scholars disagree about the merits of UBI, according to Sara Cantillon of Glasgow Caledonian University and Caitlin McLean of the University of California-Berkeley. In an article published in the Journal of Sociology & Social Welfare, Cantillon and McLean report the results of a gender analysis of existing UBI schemes to assess some of the key claims about the impacts a basic income might have on gender equality. They conclude that UBI could mitigate intra-household inequality by providing independent income. Furthermore, Cantilon and McLean assert that new and developing research shows that independent income contributes to economic autonomy and psychological well-being. They conclude, however, that the overall gender impacts of UBI are ambiguous and that more research is necessary before scholars can draw a conclusion on its efficacy in promoting gender equality.
  • Libertarians are often skeptical of government-sponsored income redistribution programs, yet some of the biggest proponents of UBI are self-described libertarians, argue Miranda Fleischer and Daniel Hemel in an article published in the Wisconsin Law Review. They explain why libertarian support exists for a program ostensibly at odds with libertarian principles. A limited redistribution policy of guaranteed periodic cash disbursements, Fleischer and Hemel argue, can address individual economic circumstances better than existing social welfare programs. Furthermore, Fleischer and Hemel claim that giving individuals cash without work requirements can further individual autonomy as individuals are best suited to understand their unique needs and capabilities. 

The Saturday Seminar is a weekly feature that aims to put into written form the kind of content that would be conveyed in a live seminar involving regulatory experts. Each week, The Regulatory Review publishes a brief overview of a selected regulatory topic and then distills recent research and scholarly writing on that topic.