Universal Basic Income and COVID-19
The conversation around Universal Basic Income before and during COVID-19
The COVID-19 crisis has exposed many vulnerabilities in our societies. It has shaken the economies of most countries as global growth in 2020 was projected at –4.9 percent, according to the World Economic Outlook June 2020 Update. Furthermore, this crisis has also been disproportionately burdensome to the most marginalized whether across class or other social cleavages such as race and gender. As is the case for any major crisis, the COVID-19 has sparked interest in public policies that were once outside of the mainstream. One such policy is Universal Basic Income (UBI). UBI has proponents on all sides of the political spectrum. In this blog, I will examine the arguments for and against UBI prior to the pandemic. Furthermore, I will explore the ways the pandemic has strengthened or weakened these arguments.
Before jumping into the arguments for and against UBI, let us first define what is it. Explicit in the idea of UBI are two important concepts: “universal” and “basic”. The term in UBI “universal” (or sometimes referred to as “unconditional”) for most of its proponents and opponents refers to a program that is available to everyone without targeting or means-testing. The universality of UBI requires that the program provide income to everyone regardless of their employment status or income levels. The second term in the UBI, “basic”, refers to a program that is designed for cash transfers to be large enough to meet the basic needs of individuals. For most, it means that this program would elevate every recipient’s income above the poverty line.
Leftist arguments for UBI
For its proponents on the left, the goal of a universal basic income is to ensure that no one lives in poverty, that everyone has a claim to the national income, and that everyone has a stable source of income in the rise of technological disruptions of the labour market. Federico Pistono, an entrepreneur and author, argues that the purpose of UBI is enshrined in the 25th article of the Universal Declaration of Human Rights, which states:
Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. (UN General Assembly 1948)
UBI is an attractive scheme for reducing poverty because it offers an alternative to the previous policies for poverty reduction which offered government-funded income support to employment. UBI is original because it divorces poverty reduction from unemployment. For leftists, the separation between poverty reduction and employment is a positive in an age of increasing labour market disruptions and stagnating levels of poverty.
Another strength of UBI is that it serves as a fix to many existing flaws of the contemporary social security systems which are highly dependant on means-testing and growing restrictions on benefits. Proponents of UBI on the left argue that its universality reduces complexity in the social security system. The issue of the complexity in social programs is an important one especially in moments of crisis. In the U.S., for example, many states have struggled to deliver the COVID-19 unemployment benefits due to the increasing complexities of their unemployment filing systems. According to the U.S. Department of Labor, the share of unemployed workers receiving benefits has dropped in all but seven states since 2007. The decrease in the share of unemployed workers receiving benefits is attributed to political efforts to complexify the system such as requiring workers to document their job searches or requiring workers to register to employment services in person. These artificial complexities in the unemployment system have proven hard to remove amid the current crisis which requires that unemployment benefits be delivered at record numbers. The issue of the needless burdensome bureaucratic red tape is not peculiar to the United States. In the U.K., for example, the increased sanctions over entitlement introduced by the governing coalition in 2013 have resulted in near one million recipients being denied benefits (Reed and Lansley 2016, p.10).
Another argument for UBI is that it increases the bargaining power of workers and increases the freedom over their lives. Since workers are not completely reliant on their employment incomes, argues the proponent of UBI, they are more likely to bargain with employers for better employment benefits, safer work environments, and greater flexibility. They argue that this increased freedom and bargaining power would result in greater opportunities for childcare, community engagement, and entrepreneurship. It would also be of great benefit to women as it acknowledges and provides financial support for the unpaid work disproportionately done by women. Furthermore, it would provide greater economic independence to women and, thus, increase their autonomy which facilitates them, for example, to leave abusive partners (Reed and Lansley 2016, p.10).
Central to many arguments for UBI on the left is the concern of technological disruptions in the labour market due to the increased automation of jobs. One of the most vocal proponents of UBI in the United States is the entrepreneur and former presidential candidate Andrew Yang. Yang argues that “ we are experiencing the greatest technological shift the world has ever seen”(Yang 2020). He adds that “ by 2015, automation had already destroyed four million manufacturing jobs, and the smartest people in the world now predict that a third of all working Americans will lose their job to automation in the next 12 years”(Yang 2020). For Yang, the current policies are not adapted to the tectonic shift of automation that the economy is undergoing. For many UBI advocates such as Yang, technological disruptions to the economy are not completely undesirable but public policy has to adapt to them. They argue that technological improvement could mean the liberation of workers who are constrained to menial and repetitive jobs. However, such liberation of workers is only possible if there is an alternative source of income into employment. Therefore, Yang argues that:
…a UBI would provide a more robust system of support in today’s much more fragile economic climate. It would be a very effective tool for tackling growing economic risk, and especially the rise of technological unemployment. Indeed, one of the most compelling arguments for a UBI comes from the acceleration in automation, with the arrival of smart robots, 3D printing, algorithms, big data and driverless cars. The 20th century model of social security is not well fitted to the 21st. (Yang 2020)
Yang also points to some concerning trends in the current economic system such as the low labour participation rate that of 62.7% which leaves “1 out of 5 working-age men currently out of the workforce” (Yang 2020).
Another argument for UBI is that it is an effective way of addressing the rise in inequality that our societies are facing. Proponents of UBI argue that the current economic system exacerbated inequality as it tends to value the jobs that require a high level of education while automating those that do not. Therefore, it is important to construct a mechanism to fairly distribute the gains of this highly technical and automated economy. It is important to emphasize that UBI, for its proponent on the left, is to function as supplementary to the welfare state and a way to substitute it. In Yang’s conception, it would be a $1000 dollars monthly payment to every American adult. Although it would not replace health insurance programs such as Medicare and Medicaid, however, it would replace some welfare programs.
Libertarian arguments for UBI
Although most of its proponents are on the political left, UBI has also attracted some thinkers on the right. The most notable proponent of UBI on the American right is Charles Murray. Charles Murray is a notorious public intellectual in the United States who is highly critical of the welfare system. Unlike those on the left who advocate for UBI as a means of eliminating poverty, Murray advocates for the UBI as a scheme to eliminate the welfare state. Murray notes that “ its advocates on the left see it as a move toward social justice; its libertarian supporters (like Friedman) see it as the least damaging way for the government to transfer wealth from some citizens to others” (Murray 2019). In Murray’s conception of UBI, which closely aligns with the latter, it would eliminate all social transfer spending. He notes that:
“[a] UBI will do the good things I claim only if it replaces all other transfer payments and the bureaucracies that oversee them. If the guaranteed income is an add-on to the existing system, it will be as destructive as its critics fear” (Murray 2019).
In his book 2016 In Our Hands, Murray designed a UBI program that would get rid of Social Security, Unemployment insurance, Medicare, Medicaid, Obamacare subsidies, and other federal assistance programs. Murray’s program would provide every American citizen of 21 and older $13,000 every year. Three thousand dollars of that amount must be spent on health insurance. Thus, leaving every adult with $10000 of disposable income.
Many on the left have pointed out that Murray’s UBI would leave millions of people worse off, especially the poor and elderly who rely on insurance health programs such as Medicare and Medicare (Matthews 2017). They argue that it is not even clear that it could reduce poverty at all. For beneficiaries of programs such as Social Security, unemployment insurance, and other programs which are supposed to replace lost wages due to retirement, disability, or unemployment; this program would cut short their existing benefits. As Matthews points out “Social Security’s average annual benefit to retired workers is $16,400 a year; Murray’s plan would offer them a benefits’ cut of more than 20 percent” (Matthews 2017). Furthermore, insurance programs such as Medicaid and Medicare often pay for services that vastly exceed the $3000 threshold reserved by Murray’s program such as chemotherapy for some elderly patients.
Given these shortcomings of his UBI program, what is Murray’s motivation for such a program? Firstly, Murray’s advocacy of UBI comes from different assumptions about poverty than its leftist advocates. Murray’s primary assumption about poverty is that it is a problem of individual character and ability rather than social structure. Murray is a controversial figure because of his views about race and IQ distribution. He argues in his book The Bell Curve that poverty can be explained primarily in terms of the poor’s innate cognitive deficiencies (Matthews 2017). Therefore, he argues that if inequality and poverty are inevitable because of the IQ distribution, government-led anti-poverty programs are misguided. Secondly, Murray assumes that the government lacks the ability to adequately address poverty. Murray’s fatalistic view of government is detailed in his book Losing Ground. In his view, government anti-poverty programs are doomed to fail. Given that the nature of poverty is fundamentally determined by IQ distribution and the government’s inability to address poverty, Murray’s motivation for UBI is, therefore, to cultivate a general feeling that poverty is a matter of personal moral failure rather than a structural failure as he notes in his opening statement to the Intelligence Squared debates on basic income that “ under the UBI, [you] can no longer plead helplessness” (Murray 2019). This goes to show that the assumptions and motivations for UBI vastly differ across the political spectrum as some of the disagreements between the anti-poverty advocates of UBI on the left and its advocates on the right are virtually unbridgeable.
Opponents on the left
Fernando Villar EPA
UBI is not universally esteemed on the political left given that it has attracted some notorious left-leaning opponents. One such opponent is Nobel prize economist and New York Times columnist Paul Krugman. Krugman challenges the assumptions of many proponents of UBI on the left that automation is displacing workers to an extent that a basic income is necessary. Krugman argues that this assumption is not justified since we have not seen noticeable increases in productivity that can be attributed to automation (Krugman 2019). He notes that if the threat of automation was real, the output per worker would not be growing as slowly as it is.
Krugman maintains that the fears about the automation of jobs as framed by CNN journalist Erin Burnett in one of the democratic debates that “about a quarter of U.S. jobs could be lost to automation in just the next 10 years” is a misguided view of the current economic transformation (Krugman 2019). Krugman maintains that the vulnerability of existing jobs in the economy to automation has always existed in modern history. He points out that in the late 1940s, about 7 million Americans were farmers and about 12 million were production workers. In the decades that followed, machines overtook most of those jobs (Krugman 2019). Yet, those decades were the golden age for American workers who saw staggering increases in income and many of whom joined the rapidly expanding middle class. Consequently, Krugman argues that UBI is not the appropriate policy for the moment. Instead, policymakers should focus on large-scale public investments in areas such as healthcare, childcare, and environmental policies (Krugman 2019). One must note, however, that Krugman’s opposition to UBI is not ideological or moral but one of prioritization of public policy. I suspect that if the American social safety net was much stronger, Krugman’s opposition to UBI would be diminished.
Opponents on the right
Just as UBI has attracted opponents on the left, it has also attracted opponents on the right. A notorious opponent of UBI on the right is Oren Cass, a public policy expert and political advisor to high-profile politicians on the right such as the 2012 Republican presidential nominee Mitt Romney. In an article for the Manhattan Institute, a notorious right-leaning think-tank in the US, Cass argued against UBI not merely on a practical level but also a moral one as he claims that “even if it could work, it should be rejected on principle” (Cass 2016). Cass argues that UBI should be rejected in principle because it “redefines the relationship between individuals, families, communities, and the state by giving government the role of provider” (Cass 2016). For Cass, the fact that UBI divorces income from employment is the biggest drawback of such a program because it would render “[work] by definition [to] become optional, and consumption [to] become an entitlement disconnected from production” (Cass 2016). Fueling Cass’ opposition to the UBI are two important assumptions. The first is that the role of social safety nets is to ensure that “no one starves, freezes, or dies on the hospital steps, but it does not typically offer a full substitute for employment” (Cass 2016). The second is that employment is a necessity for earning a living and not a choice.
Consequently, basic income would, firstly, reach the goals of a social safety net which in his view is mere survival. Secondly, it would strip employment of its primary function which is to provide an income to live on. Cass also argues against the view that UBI is necessary for an economy in which jobs are being displaced by technology as he points out that the U.S. labour market has “kept pace with population growth, adding 80 million net jobs since computers started coming on the scene in the 1960s” and that “[approximately] 60 percent of the working-age population remains employed — slightly above the post-war average” (Cass 2016). On the view that UBI is an effective means of reducing poverty, Cass argues that poverty is not a matter of material well-being but rather one of social-well being. Cass alluded to Charles Murray's work to claim that “ the greatest crisis facing less educated and lower-income Americans are social, not economic” (Cass 2016). Furthermore, Cass argues that poverty should not even be central to public policy but, rather, upward mobility should be society’s priority. Cass concludes that UBI is a misguided public policy choice because it discourages upward mobility and disincentivizes employment which is a source of structure and social stability.
UBI in the age of the COVID-19 crisis
The nature of the COVID crisis is cynical in that it most gravely affects the working-class which is disproportionately composed of people of colour and minorities. Given that the collapse of employment-based income in the midst of lockdowns, governments resorted to direct cash transfers to citizens. In Canada, the Canada Emergency Response Benefit was designed to provide $500 per week for a period of six months to workers who lost their jobs due to the pandemic. Furthermore, Yuen Pau Woo, a B.C. senator, has asked the Parliamentary Budget Office to study the potential cost of a UBI program in Canada. The PBO subsequently published a study that estimated the program to cost between $47.5 billion to $98 billion on a semi-annual basis depending on the reduction rate that will be applied to the maximum amount of the basic income (Ammar and al. 2020, p.1). In the U.S., the federal government implemented a one-time cash handout of $1200 to every adult citizen in addition to a $600 boost to unemployment insurance. Italy introduced guaranteed minimum income as well as an emergency support mechanism consisting of a €600 bonus for autonomous and part-time workers.
The arguments for UBI during the current COVID-19 crisis have largely remained the same as those prior to the crisis. Emilio Caja and Leonie Hoffman argued in Jacobin magazine that the advantages of UBI amid the present crisis are the following:
1) it directly addresses the income problem workers face, without recourse to employers or extensive means tests; 2) it flexibly ensures income security as employment relations change; 3) it avoids a fragmented response tailored to specific groups; 4) it can account for the needs of those in atypical, informal, or precarious working situations (e.g., those on zero-hour contracts, the pro forma self-employed), and those performing unpaid work within the family or community, where e.g., childcare now takes up more time due to school closures; and 5) it increases the bargaining power of workers who remain engaged in essential activities, to fight for safer working conditions and compensation for the risks to which they are exposed. (Caja and Hoffman, 2020)
These arguments are mostly the same arguments advanced by proponents of UBI prior to the COVID-19 crisis such as Andrew Yang or Federico Pistono. COVID-19 has, however, exacerbated the reasons for UBI. It has forced us to re-examine the relationship between work and income the current crisis has strained that relationship. It has forced us to re-evaluate the nature of paid work and unpaid work such as childcare. It has made explicit the need for a stronger social safety net in ways previous crises did not. The current crisis has also highlighted the need for greater bargaining power for the working class which has been labelled “the frontline” of this crisis as it disproportionately carried the risk of infection.
On the argument that UBI is not necessary because automation has not proven to disrupt enough jobs to worry about; I would argue that while it is difficult to predict the future of our economy, it is reasonable to speculate that the current crisis will accelerate the current trends of automation. As David Bloom, Professor of Economics and Demography at the Harvard T.H. Chan School of Public Health (HSPH), and Klaus Prettner, Professor of Economics at the University of Hohenheim; modern technological tools have, firstly, allowed companies to continue to operate amid this pandemic through remote work (Bloom and Prettner 2020). These opportunities, however, mostly been for the advantaged of highly educated workers and, thus, disadvantaged low-skilled workers who already “who have poor access to health care and often face higher infection risk due to reliance on public transportation and lack of opportunities to socially distance in the workplace” (Bloom and Prettner 2020).
Secondly, technological disruptions to the labour market might indeed accelerate due to COVID-19 as companies have greater incentives to substitute low-skilled workers with automated systems. The reason is that automated systems are “obviously not susceptible to pathogens that affect humans (although they might be quite susceptible to digital pathogens)” (Bloom and Prettner 2020). Lastly, the disruptions to supply chains and travel caused by COVID-19 might undermine the integration of economies and encourage nationalist economic models. This would result in an inward turn as countries would attempt to bring back inside their supply chains and re-shore important sectors of production. Although policymakers may hope that this re-shoring may increase low-skilled jobs, Bloom and Prettner point out that “theoretical arguments and empirical evidence on re-shoring and automation show that this would instead enhance robot adoption and not improve the lot of low-skilled workers” (Bloom and Prettner 2020). While the main arguments for UBI prior to the COVID-19 crisis remain mostly the same, the trends exacerbated by the current crisis make those arguments sounder and, at least, worthy of experimenting in these peculiar times.
Sources
Ammar, Nasreddine and al. “ COSTING A GUARANTEED BASIC INCOME DURING THE COVID PANDEMIC” Canada Parliamentary Budget Office. 07 July 2020
Badger, Emily, and Alicia Parlapiano. “States Made It Harder to Get Jobless Benefits. Now That's Hard to Undo.” The New York Times, The New York Times, 30 Apr. 2020, www.nytimes.com/2020/04/30/upshot/unemployment-state-restrictions-pandemic.html.
Bloom, David, and Prettner, Klaus. "The macroeconomic effects of automation and the role of COVID-19 in reinforcing their dynamics." VOXeu, 25 June 2020. https://voxeu.org/article/covid-19-and-macroeconomic-effects-automation
Caja, Emilio and Hoffman, Leonie. “A Basic Income Is a Lifeline in This Crisis — But Can’t Solve Everything” Jacobin Magazine, 20 April 2020. https://www.jacobinmag.com/2020/04/unconditional-basic-income-coronavirus-pandemic-crisis
Cass, Oren. “Why a Universal Basic Income Is a Terrible Idea” Manhattan Institute, June 15, 2016. https://www.manhattan-institute.org/html/why-universal-basic-income-terrible-idea-8984.html
Harvey, David. (2020). Anti-Capitalist Politics in the Time of COVID-19. Retrieved August 07, 2020, from https://jacobinmag.com/2020/03/david-harvey-coronavirus-political- economy-disruptions
Krugman, Paul. (2019) “Don’t Blame Robots for Low Wages” The New York Times, https://www.nytimes.com/2019/10/17/opinion/democrats-automation.html
Matthews, Dylan. “A basic income really could end poverty forever” Vox, 17 Jul.2017 https://www.vox.com/policy-and-politics/2017/7/17/15364546/universal-basic-income-review-stern-murray-automation
Murray, Charles. “A Guaranteed Income for Every American” The Wall Street Journal, 03 June 2019, https://www.wsj.com/articles/a-guaranteed-income-for-every-american-1464969586
Rajan, Raghuram. Interviewed by Hal Weitzman. Virtual Harper Lecture, University of Chicago, 17 Apr. 2020, https://www.youtube.com/watch?v=948mT8WKDqk. Accessed 07 August 2020.
Reed, Howard, and Stewart Lansley. "Universal Basic Income: An idea whose time has come?." London: Compass, 201
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Yang, Andrew. 2020 https://www.yang2020.com/what-is-freedom-dividend-faq/
