Germany has begun an intriguing experiment. For a period of three years, a group of people will get €1,200 a month. (At today’s exchange rate, that’s $1,420.) The money is free; the only requirement is that recipients answer researchers’ questions about what they’re doing with this unconditional income.
Officials from the Mein Grundeinkommen (My Basic Income) charity are convinced that an unconditional income for all citizens would solve many current problems. The assumption is that people get more creative and become freer and happier if they don’t constantly face the pressure to earn enough money to get by.
Whether this lives up to reality will be explored scientifically during the project. “We’ll analyze what people are doing during a period of guaranteed material security,” project chief Jürgen Schupp from the German Institute for Economic Research (DIW) told DW.
Among the questions he’ll look into are: Will the test persons spend all the money or will they save a certain amount? Will they stop working altogether or work less? Also, will they donate money to others?
The experiment will give his team all the answers it needs, says Schupp. Even changes in people’s stress levels can be identified with the help of hair samples, he argues.
During the primaries, Andrew Yang brought the issue into more prominence, but the debate about UBI–an unconditional basic income– has been going on for years. The debate centers on dramatically different predictions of what people will do when they don’t have to do anything. Will receipt of a basic income make people lazy, make them less apt to work, less productive? Or is a UBI a tool to rationalize current social welfare systems (and not-so-incidentally, prepare for an era when automation has eliminated millions of jobs)?
I have been intrigued by what I see as the promise of a UBI.
What if the United States embraced a new social contract, beginning with the premise that all citizens are valued members of the American polity, and that (as the advertisement says) membership has its privileges? Contracts are by definition mutual undertakings, agreements in which both sides offer consideration. In my imagined “Brave New World,” government would create an environment within which humans could flourish, an environment within which members of the polity would be guaranteed a basic livelihood, a substantive education and an equal place at the civic table. In return, members (aka citizens) would pay their “dues:” taxes, a stint of public/civic service, and the consistent discharge of civic duties like voting and jury service.
With a UBI (in contrast to welfare) there would be no phase-out, no marriage penalties, no people falsifying information, no daunting (and expensive) bureaucracy.
Support for the concept hasn’t been limited to liberals and progressives. Milton Friedman famously proposed a “negative income tax,” and F.A. Hayek, the libertarian economist, wrote “There is no reason why in a free society government should not assure to all, protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need descend.” In 2016, Samuel Hammond of the libertarian Niskanen Center, noted the “ideal” key features of a UBI: its unconditional structure avoids creating poverty traps; it sets a minimum income floor, raising worker bargaining power without wage or price controls; it decouples benefits from a particular workplace or jurisdiction; since it’s cash, it respects a diversity of needs and values; and it simplifies and streamlines a complex web of bureaucracy, eliminating rent seeking and other sources of inefficiency.
Hammond’s point about worker bargaining power is especially important. In today’s economy, characterized by dramatically-diminished unions and the growth of “gig work,” employee bargaining power has dramatically eroded. Wages have been effectively stagnant for years, despite significant growth in productivity. In 2018, Pew Research reported that “today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago.
If the U.S. had a UBI and single-payer health insurance, workers would have the freedom to leave abusive employers, unsafe work conditions, and uncompetitive pay scales. A UBI wouldn’t level the playing field, but it would certainly reduce the tilt. It’s also worth noting that a UBI would have much the same positive effect on economic growth as a higher minimum wage. When poor people get money, they spend it, increasing demand.
Previous experiments and pilot projects have been encouraging; receipt of a guaranteed basic income has not caused people to stop working, and the money hasn’t been used for liquor and sin. Germany’s experiment looks to be larger than the others that have been reported, and it will be interesting to see its results.