The Basic Income

We all understand the importance of eliminating mindless consumerism and learning to live more simply. But at the same time we face huge economic inequalities. If we truly all start to live simply, won’t this mean that we’ll be producing less, working less, and buying less? Won’t “simple living” and environmentalism hurt the economy and thus the poor as well? A lot of people are hung up with the idea of “green growth,” but we need to face the facts. If we started living simply, it would mean that economic output would decline. For the environment, and for the planet, this would be great news, as the planet is being pillaged for the sake of our consumer fancies; but in the meantime, won’t this hurt the poor?

Various proposals to deal with the problem of inequality at the same time that we preserve the environment are being put forward. They include reducing the work week, “job sharing,” and a steep progressive income tax (as the U. S. had in the 1950’s and 1960’s). I would like to suggest a different idea, the “basic income.”   This is also known as the “citizen’s income,” and I recall this topic in college debate club as the “guaranteed annual income.”

The idea of a basic income is simple. You give a standard income to each adult citizen, hopefully enough to subsist on, say $10,000 per year. Then you can eliminate most welfare programs, possibly much of Social Security, and likely reduce crime and the huge and expensive jail system as well.

How Would It Work?

Uh, wait a minute, where’s the money coming from for all this? Well, you’d raise taxes, either through a higher flat tax rate or through higher progressive taxes. The tax increases would be quite steep, perhaps ranging from 30% to 70% on a progressive scale, or a flat tax rate of 45%.  At the lower end of the income scale, the tax credit would cancel out the increased taxes and people would come out ahead, but it would raise the taxes of the rich.

But people at the bottom would still benefit greatly. People with zero income would get $10,000 a year. People earning income less than a certain limit (perhaps $30,000?) would still wind up making money off the government, because their higher taxes would be more than offset by their $10,000 a year credit. People up to another level (perhaps $50,000?) would pay about the same as they do now. People making more than that would see their taxes increase.

This would be nothing less than a complete revolution in the way the U. S. A. handles its economy. It is a huge income transfer from the rich to the poor, and would encourage people to stay at the lower end of the income scale.

There are some obvious questions here, such as, where’s the work incentive? Wouldn’t everyone want to get the $10,000 credit and just quit working? This doesn’t seem likely, since most people already earning $10,000 don’t just abandon all ambition upon earning this level. They try to get better paying jobs. In fact, even upon earning substantially more, say $50,000 or $100,000 or $1,000,000 under the current system, people still seek higher income.  They did this even during the 1950’s when the marginal tax rate on the highest income was over 90%.  So the work incentive is unlikely to completely disappear.

Possible Advantages of a Basic Income Guarantee

1. The basic income would have the effect of eliminating a lot of menial jobs; or alternatively causing a substantial rise in their rate of pay so that people would pay for their real cost. A key problem with our consumer society is that a lot of the really menial jobs are actually harmful and should be eliminated. Slaughterhouse workers, lawn care, and flipping burgers, are a couple of low-paying occupations that in the first place people don’t like, but in the second place we shouldn’t have in the first place.

We shouldn’t have lawns, especially in the western U. S. because of water shortages; any investments in water should go to vegetable gardens or xeriscape flower gardens. Slaughterhouse workers have the most dangerous occupations in the country and the lowest wages.  We shouldn’t have slaughterhouses in the first place, and if we do have them, people should be forced to pay a fair wage for this dangerous and brutal work. And we shouldn’t be eating fast-food burgers, which are only 2% to 15% meat to begin with, much less flipping them. The basic income is a way of decreasing or eliminating these kinds of menial jobs.

In this respect, the basic income is superior to both proposals to reduce economic output by lowering the work week or by job-sharing.  Job sharing or lowering the work week just means that the stupid and menial jobs would still be out there, but that people couldn’t work long hours at them. Under the basic income, though, unattractive low-paying jobs (like flipping burgers) would lose out — people would regard just living off their credit as more attractive.

2. Basic income would address directly the “commoditization” problem outlined by Jack Manno in his book Privileged Goods.  There are a lot of activities that provide real economic value, that aren’t good “capitalistic” investments.   For example, consider these pairs of possible money-making activities or commodities:

Economic sector Higher potential Lower potential
Children’s play Barbie dolls, movies Child care, group play
Health care Drugs, insurance Lifestyle changes
Food production Commercial fertilizers Knowledge of the soil
Finance Junk bonds Gifts, personal loans

In each case, while both columns for each economic sector theoretically contain market goods, the first column is much more easily commoditized and marketed than the second, even though in many cases the second would be the better choice.  A basic income would make it easier for people to choose or offer the lower commodity potential items.  They could take care of kids or cultivate backyard gardens.

3. The basic income would allow employers a major benefit: you could abolish the minimum wage. You might be able to decrease Social Security. If employers wanted to pay $1.00 per hour and there were people willing to take the job, it would be legal. You would not need the minimum wage in order to guarantee people a basic subsistence; the subsistence would already be there. The low-paying jobs that people will actually queue up for are the “jobs of the heart,” things that people are volunteering for right now and the nonprofit jobs which already draw people in at a low income even today. No one is likely to take a job flipping burgers for $1.00 an hour  — not if they don’t have to, anyway, and with a basic income, you don’t have to.

4. For many people and businesses, people working overtime are more efficient (per hour) than people who work part time or even full time. You get into your job and really know it thoroughly. Job sharing means that people will be working two days a week, and then when they go back to work you sort of have to figure out your job all over again. With the basic income, some people may be working full time or even overtime — namely, the people both qualified for and willing to take full time and overtime jobs.  Those not qualified for or unwilling to take this kind of work would be doing something else, or nothing.

5. The basic income would likely reduce crime. We already have a basic income in this country — jail. One man in North Carolina recently robbed a bank of $1, and then sat down waiting for the police to arrest him, so he would go to jail because he knew he would get some treatment of his medical problems in jail. But it is very expensive to keep people in jail (a lot more expensive than just giving them a basic income). A lot of crime is high-risk, high-return activity (drug dealing, robbing banks, etc.) that is being propelled forward because the low-risk, low-return activity (flipping burgers) is so deadly boring and so dead-end.  This would make low-risk, low-return activity of a different sort (working at fulfilling but low-paying jobs, or doing nothing) much more attractive.

In conclusion . . .

There is quite a bit of literature on basic income, but no one has really written a popular exposition of it, as far as I am aware. There is a network of people in the U. S. talking about the subject and in the U. K. as well, where it is called the “citizen’s income”. The Green Party of the U. S. A. has raised the topic, as well as the Green Party of the U. K. I haven’t seen a lot of discussion of this by “ecological economists,” though I know that Herman Daly has said some things about needing a maximum and a minimum income.

There are some key unresolved problems here, such as what this would really look like in income distribution terms, how the incentive to work would change, and how to handle immigrants.  We would also need other reforms to deal with the problem of a shrinking economy, or a steady-state economy at a much lower level. For example, we need to address banking reform and the whole problem of debt, most of which currently can only be paid off in an expanding economy. But the basic income is an economic idea which may be very useful in the coming energy descent.


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