Understanding Guaranteed Basic Income

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Basic income (BI) is not just a left-wing concept. Right-wingers have been advocating for BI for years. Although this may seem great in theory (yay we’re all in agreement!), this can become problematic in practice.

There are multiple models of BI that have been proposed, each with their own individualized complexities based on geographic region. In reality, most BI theories have incorporated elements from one of the two leading BI models: negative income tax (NIT) and universal (UBI). For the sake of brevity, I’ll only be focusing on these two.

In brief, the NIT model involves a defined income threshold. Every person whose income falls below that threshold will receive a monthly payment to raise them up to the threshold. In the UBI model, everyone — rich and poor — receives the same monthly payment.

Neo-liberals support a BI that facilitates reliance on the free market. Libertarian economist Milton Friedman’s proposed NIT policy is a perfect example. In his plan, there would be a designated income threshold. For simplicity sake, let’s say that this amount is $5,000. Every person would be required to file their income taxes in order to determine eligibility. If a household of four had a total income of $2,000, this would constitute a negative taxable income. The idea would be then to apply a negative tax rate of -$3,000 (the difference), and give the household a predetermined proportional subsidy (i.e. half of the difference — $1,500). In the end, that household would have a total income of $3,500.

Here’s another example using the same hypothetical numbers ($5,000 as the defined income threshold with a proportional subsidy rate of half). There is a household of four that has no income. Based on the above-mentioned threshold and proportional subsidy rate, that household would have a guaranteed income of $2,500 (the difference between $0 and $5,000). In other words, under this NIT policy, every household of four would have a guaranteed income of $2,500.

While this seems like a decent strategy, Friedman’s rational behind this is to empower people, vis-a-vis a cash transfer, to purchase their social needs from the private marketplace. To put it simply, neo-liberals advocate for BI payments with the understanding that it would effectively eliminate all other social programs. This is literally Charles Murray’s exact suggestion: provide everyone a set amount and scrap the welfare state — including Medicare and Social Security. It’s a simple cash transfer that does nothing to address systemic poverty. What the NIT model excels at, however, is increasing reliance on the free market. Who ultimately profits? Owners of capital.

On the other side of the fence, the progressive Left fight for comprehensive BI that complements, not eliminates, existing welfare programs. Relying on this premise, the UBI model becomes the most desirable. The main argument is that UBI is unlike other conventional welfare programs — healthcare, socialized housing, etc. These programs help cushion poor and working people from the devastating effects of the free market. Although serving a crucial need, these programs fail to tackle the actual problem: the operation of the political economy. A robust UBI program has the potential to do so, as it can truly divorce work from income. Should the benefit amount be high enough to cover basic needs, this would effectively allow workers to subsist outside the labour market. Workers would no longer be compelled to work, and consequently employers would have a much more difficult time exploiting their labour.

There have been some arguments raised that progressives should support a NIT policy because it makes for an “easier win” with the government. Although I certainly empathize with this position, it ultimately misses the point. Progressives should support what is right, not what is easy. In this current labour market, anything less than a drastic social policy will be a false win for workers and a true win for capitalists.

Thanks for reading!

This article was originally published on www.jenonmoney.com. If you enjoy my writing, check that out for more content. — Jen

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Productivity, craftsmanship, and the pursuit of excellence at work. Writing now at jennifertchan.substack.com.

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