Universal Basic Income (UBI) calls to an unconditional cash transfer to every citizen, usually received monthly. In the U.S. Presidential elections, Democratic nominee Andrew Yang proposed this idea and it is now catching on like wildfire. His proposal, called the “Freedom Dividend” plans to give each American citizen $1000 every month. No strings attached.
The idea isn’t a new one, however. Guy Caron and Martin Luther King Jr. on the left, and Richard Nixon and Milton Friedman on the right, have supported an idea of a Universal Basic Income. The question then arises: can this policy work in Canada?
I talked to Scott Santens, one of the fiercest advocates for UBI in the 21st century. His work has revolutionized political discourse in North America, and its ramifications are being felt globally. Santens breaks down how and why a Universal Basic Income can work for Canada.
TPM: What is basic income and why should I support it?
Santens: The Universal Basic Income (UBI) is society investing in itself. It’s an unconditional income floor that’s provided individually and universally in the form of cash. Studies show a lack of basic income has negative impacts on society which gets worse as automation and technology transform the economy.
Today we are witnessing rising poverty and income inequality on an unprecedented scale. This leads to a lack of stability and security and increases the burden on services like health care and the criminal justice system. In fact, it is far more expensive not having basic income than having it. This is because the cost of child poverty, and crime itself, far exceeds the costs of basic income.
TPM: Is UBI can a Communist / Socialist policy?
Santens: It’s neither left nor right. It’s forward. In fact, this idea was also promoted by Milton Friedman and Friedrich Hayek who were the most prominent free-market economists of the last century. Because markets run on cash, they believed that a UBI was a good idea. The market is essentially voting with your dollars; your demand influences supply. The board game “Monopoly” can’t work if you don’t get a UBI every time you pass “GO,” and this is just that. A way of improving markets. Because Markets can’t tell the difference between people not wanting products and people not being able to afford those products, a UBI helps in clearing this difference.
In fact, Alaska is a conservative state in the US and they an annually-paid UBI. They have had it since 1982 and they love it.
TPM: Won’t this lead to hyperinflation?
Santens: This is the most frequently asked question I receive. When we talk about basic income people don’t consider taxes. If you fund it with an income tax, there’s net payers and net receivers. There’s also those that pay as much as they receive. You’re not creating more money in the economy so there can’t be hyperinflation.
Then there’s the other question, “what’s stopping a grocery store from raising their prices?” Well, in a free market, someone will not do that and prices will automatically drop to equilibrium. In Alaska, when dividends are given out, you actually witness a lot of sales. So the basic point is that there’s no monetary expansion and competition still exists.
TPM: Won’t this mean people become lazy?
Santens: Evidence does not show people work less because of UBI. It shows the opposite. In the Canadian Mincome experiment in the 1970s, we saw some great results.
Basically, a city in Manitoba was given a basic income for a set number of years and for that time period, poverty was completely wiped off. Furthermore, the city witnessed a school attendance rate that exceeded 100% because students who had previously dropped out could now afford to re-enroll.
UBI also shows that it creates an “Entrepreneurship effect.” According to studies done in India, villages that received a basic income were three times more likely to start their own business. In Namibia, self-employment increased by 301%. A basic income also helps unpaid volunteers as it motivates them to continue working.
Under the current system, you don’t have the ability to not work. You have no choice. You accept jobs that are below you and that leads to wage slavery. You become overworked. A basic income actually helps workers. Because currently, workers don’t have strike power, it leads to stagnant wages. A UBI will give a guaranteed income to ensure workers can bargain more effectively. It creates more competition between employers and leads to a better labour market. It also allows people to do jobs actually want to do.
TPM: If robots and automation are taking away jobs, how will people find new jobs with basic income?
Santens: Automation is meant to reduce our toil to focus on what’s important for us. Surveys show that only 15% of people globally are engaged in their work. Therefore, we should be embracing technology. I believe we should increase the basic income as productivity rises. If there’s half as much work to do in the future, we could work less and still be employed full time. Annual work hours are being lowered over time, however, since 1973, we are now working 47 instead of 40 hours per week. We’re twice as productive and we’re working more — makes no sense.
TPM: How many jobs are we expected to lose to automation in Canada in the next 5 to 10 years?
Santens: I’d say around 10-30% of jobs could be eliminated.
It’s not that technology just takes away jobs; it also creates some too. However, 94% of new jobs are part-time contractual work in the US for example.
Jobs will be eliminated mainly in rural areas and created in cities. High-school educated people will suffer the most (suicide, opioids, etc) and it’s already prevalent today.
TPM: So is this a replacement of welfare, or does welfare need to be cut?
Santens: This is a reformation of the welfare safety net upon an unconditional foundation. In welfare, you pay people to do nothing. If you pay unemployment benefits and working only gives a slight increase in income received, it makes no sense to work.
With the UBI, people can do anything. If you get $1000 a month now and then get a job, you still keep the $1000.
When we look at people with disabilities, everyone agrees they should receive economic support. However, in the US, only one-fifth of disabled people are actually getting disability benefits. This leads to massive poverty. People have to prove they are sufficiently disabled and the waitlist for this exceeds 1 million. This conditionality creates giant holes to fall through.
TPM: If the UBI is capped at $1,000 a month, doesn’t this mean you are restricting each person’s welfare to a maximum of $1,000 a month?
Santens: The UBI is an unconditional floor. It says nobody should have less than $1,000 a month. Other welfare programs can exist for sure.
If we look at disability benefits and let’s say you earn $1,500 in disability and then you install $1,000 in basic income. The government can then spend less on disability and you can still get your basic income. The government can afford to, let’s say, reduce disability benefits from $1,500 to $1,000. That means you get $1,000 in disability and $1,000 in basic income. You get $2,000 dollars.
TPM: So why just $1000 a month? Why not more?
Santens: The poverty line in the U.S. is $12,500 a year for a single adult, with $4,000 for each additional member in the house.
With a UBI, if there are two people in your household you can get $24,000 a year which is more than the $16,500 poverty line. You can choose your
UBI to be 80% of the poverty line or more it depends from case to case.
TPM: How will this be funded in Canada
Santens: It’s actually rather simple. Look at how much you are spending on conditional benefits and see how much needs to be eliminated to compensate for the unconditional Universal Basic Income.
You could fund this with a good Value-Added tax.
A wealth tax or a financial transaction tax impact the rich and not the lower and middle class, and that could be useful too.
There’s also the Land Value Tax.
You could do quantitative easing in the hands of the people. For example, with the US quantitative easing cycle, we could give $200 per month in the hands of the people.
You could even have a slightly inflationary monetary policy too, since technology is inherently deflationary and banks are having a hard time reaching inflation targets.
In essence, a Universal Basic Income is not a proposal exclusive to the Left or the Right-wing. It’s a pragmatic proposal that offers unconditional benefits to every citizen to make society more humane by giving everyone greater access to equal opportunity.