Editor’s note: Dr. Mike Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook, and public policy.
RALEIGH – Mark Zuckerberg, the billionaire founder of Facebook, recently caused a stir by throwing his support behind the idea of a guaranteed basic income. Just speaking to my neighbors, colleagues at work and friends at the gym, I’ve noticed that he certainly has set off some passionate conversation about the merits – or demerits – of the idea.
Now let me quickly say the idea of a guaranteed basic income is not original with Zuckerberg. In fact, the notion has been around for at least 200 years. I remember first hearing about it in a college class in the late 1960s. Interestingly, there have been advocates of a guaranteed basic income who would be considered on the “left” of the political spectrum as well as on the “right” of that spectrum.
The threat of automation and globalization taking away good-paying jobs as well as the relatively slow recovery in jobs and pay from the Great Recession are likely reasons why the guaranteed basic income idea has resurfaced.
Of course – as is my goal – I won’t take a personal position on the concept of a guaranteed basic income. Instead, I’ll present you with some pros and cons and then let you decide.
The core concept of a guaranteed basic income is rather simple. The government would decide how much income a person needs to achieve a basic standard of living, and then the person would be guaranteed to receive that income every year. Easy as molasses, right?
Not quite. Even if you agree with this idea, there are many questions about implementing it. For starters, would everyone get a check, or would only people who earned below some set amount (like 150% of the poverty level) be eligible?
Based on my own non-scientific poll, I found most of my acquaintances who liked a guaranteed basic income wanted it only for financially strapped people. But some say the paperwork and bureaucracy of qualifying eligible people lead them to recommend everyone – poor, millionaires and billionaires alike – should get a check.
But there are more questions. Should the checks go to households (individuals living under one roof, often with children) or should they go to individuals? The argument for the latter is that households can change in composition, whereas individuals persist. Also, if children are to be included, should their amount vary by age?
How should the dollar amount of the guaranteed basic income change over time, if at all? One easy answer is to tie it to a cost-of-living indicator, like the CPI (Consumer Price Index). But the CPI is an average for all people. Costs faced by households and individuals can vary widely based on what they buy and where they live.
Here’s a biggie. Should there be any “strings attached” to how the guaranteed basic income is spent? Purists behind the idea say no – that the guaranteed income is not a gift, but is a right of every person, and so that person should decide how to spend the funds. Opponents worry about funds being spent on items that might be harmful to the individual’s long-run interests. They say modern technology can easily prohibit a device like a debit card being used to purchase certain items. Of course, long debates would ensue about what should be on the list of prohibited items.
Finally, there is the question of whether a basic guaranteed income should replace the multitude of programs that already exist to help households and individuals who struggle to achieve a basic standard of living on their own. A short list of these programs (there are actually 172 individual programs) includes Supplemental Nutrition Assistance (the modern name of Food Stamps), Medicaid, housing vouchers, Temporary Assistance for Needy Families and the Earned Income Tax Credit.
How much would a guaranteed basic income cost? Obviously, the answer depends on the specifics of the program. One economist has proposed a system giving everyone 21 and over $13,000 annually as long as they earn no more than $30,000. After that, the amount is gradually reduced but is never less than $6,500 regardless of income. This economist estimates there would be no net cost to the government if all other social support programs, including Social Security, Medicare and Medicaid, were ended. But keeping these social support programs could push the net cost of a guaranteed basic income to the trillions of dollars.
One big concern those supporting a guaranteed basic income must confront is the idea that such a guarantee will encourage some people to avoid doing the things recommended to “make-it” in today’s economy. In response, backers of a guaranteed basic income contend existing social support programs also have this issue.
So get ready for a new debate on the old issue of a guaranteed income. With so many challenges in the workplace for many individuals, is now the time to implement the idea? Or do economic challenges all generations have faced ultimately motivate them to find new and better ways to succeed?
There is a wide gulf between these two perspectives, but we may soon have to decide.