The Case for a Guaranteed Minimum Income
July 08, 2014 | | Link to article
By David Vognar
In a perhaps apocryphal American cultural adage F. Scott Fitzgerald is often quoted as saying, "The rich are different from you and me," to which Ernest Hemingway responded, "Yes, they have more money." Lack of income is seldom discussed as a simple lack of funds; there are often cultural associations attached to the condition.
The lack of a guaranteed income floor has been a social and cultural issue that has considerably affected America. It is also a leading reason why interpersonal violence, psychological struggle and economic collapse happen, as I will document.
There is a pressing need for government intervention to assist poor people in their efforts to secure more stable income, whether it is through the direct provision of money or through more stable work schedules that could help workers to predict their work hours from week to week. Some have even floated the idea of guaranteed jobs as a way to boost the incomes of the poor. I believe direct cash income provision would be the least heavy-handed approach.
Guarantees could be an effective way of stabilizing society because it would stabilize poor people's incomes, which are often unreliable as sources of stability in their lives, which hence makes their lives unstable. This leads to all sorts of problems. Stand Up Chicago has documented how increased income inequality is responsible for surging violence in the city. Additionally, the reliance on an employer for money as a source of livelihood and survival convinces people to do all sorts of things they wouldn't normally do. It distorts ethics, which leads to economic bubbles and eventual collapses. Providing an income floor that could serve as a comfortable foundation, with potential earnings from employers that could add to that income, seems like a logical solution to also stabilize the economy.
Guarantees are nothing new in the policy arena. The guaranteed minimum income has been called for by people as different as Martin Luther King Jr. and Richard Nixon. Some have recently called for subsidized wages for the unemployed. For the employed, the Center for Law and Social Policy, Retail Action Project, and Women Employed has written that establishing guaranteed minimum hours and reporting pay could go a long way toward assisting poor workers. They cite a study that found 59 percent of full-time workers experience schedule fluctuations in days or hours worked from week to week. Their report found this especially troubling because according to their estimates, as much as 80 percent of retail hours are stable throughout the course of a year.
Establishing guaranteed minimum hour policies by industry and profession could overcome this barrier either on a company basis, state-by-state basis or a national basis but would involve near total government regulation of work schedules and sacrifice needed flexibility of real-time scheduling leeway if employers don't elect to do it themselves. One could envision dividing the economy into the following major sectors for consideration: the natural products sector, the manufacturing sector, the retail and financial services sector and the education sector. Basic hours guarantees would then have to be further established for each sector based on full-time/part-time status and job function. The re-organization of the entire economy based on such a move would be so gargantuan as to reduce confidence in the entire system for the transition period.
Income redistribution in the form of guaranteed income is a much smarter solution. Whereas government control over the day-to-day working of the economy has come under criticism from most economists since the days of Adam Smith's invisible hand argument, modern economists, such as Ostry, Berg and Tsangarides, are finding that income redistribution as an alternative can enhance growth in certain cases. Even conservative political leaders like Charles Murray are recognizing that redistribution via direct cash payments would result in less than $1 trillion of the cost of the current system when phased in over 10 years. Murray estimates a $10,000 flat cash payment would suffice; I think $30,000 is more like it to make it in today's world.
Those figures hold if operationalized as a guarantee to all American citizens, thus if not means tested, potentially resulting in a liberal estimate of expenditures. It would be important not to means test the guarantee to assure that issues of fairness are addressed. The $10,000 figure could be increased to exceed the poverty gap on a state-by-state basis, thus ensuring that no American falls anywhere close to poverty, while still preserving the economic incentive for people at all spots on the spectrum to work if they desire to earn more income, which would not be penalized.
Concerns by those of more conservative political persuasions about a guaranteed income's potential to decrease work incentives and in general lead to less competitiveness in the economy could be allayed by arguments about the ecological crisis and a little reflection on how good ideas in a knowledge economy are formed. The less unnecessary work that is performed in the economy, the better the environment will fare. While certainly the economy can still grow and need not stop growing to assist in the ecological recovery process, cutting out inflated incentives to work would decrease ecological throughputs that damage the environment.
Those who can survive with less will do so for the reward of having to work less. As Lambert writes, only a third of workers who work less than 35 hours a week claim that they want to work more hours but are unable to do so.
Finally, it is important to reflect on how good ideas are formed. Working a nine-to-five job doesn't always inspire creative thinking that can innovate the economy. Einstein enjoyed the simplicity of his job, because it allowed him to tinker with ideas throughout the day and let his real creative juices flow. Simply put, a guaranteed income policy would unleash the potential within each of us to pursue interests we have outside of work -- oftentimes ideas that can change the world. The intelligence and interests we all have aside from our ability to perform economic functions might be just as productive as in Einstein's case.
While it may seem that a guaranteed income is a rather radical solution to the problem of low-income, essentially it emerges as the least radical solution when compared with the vast and unprecedented economic intervention the government would have to pursue in order to guarantee work hours or guarantee jobs. It is sadly still a truism that economics so often plays out like a morality tale. Those who are deemed to have used their talents and intelligence are the "winners" in the economy; but more so, they are considered to have acted more morally. Such a sequacious and sententious story dogs our solutions to poverty today. When we stop viewing economics as a morality tale and one of a much wider variety of factors, we can appreciate that poor people simply lack money and guaranteeing everyone income can alleviate poverty and improve our world.