Robots Don’t Need Welfare
Universal Basic Income as Tech Takes Over the World
In 2019, the U.S. Census estimated that 40 million people live below the poverty line in the United States.[1] Even with one parent working, a monthly cash payment of $1,000 combined with a $15 an hour full-time job provides an income of about $54,000 for a family of four.[2] It comes as no surprise that during his 2020 Presidential primary race Andrew Yang advocated for a Universal Basic Income (UBI) that would provide every citizen over 18 with a $1000 monthly stipend. Nevertheless, it is unclear how a UBI would affect the labor market and the prosperity of the poorest Americans, especially those who require consistent and ample cash assistance due to disability, lack of education, or children. With technology advancing rapidly and Silicon Valley entrepreneurs predicting loss in labor demand due to robotic automation, policymakers will have to balance the benefits of a robust welfare state with those of a UBI. Although a UBI might increase the purchasing power of more people and decrease poverty, it could also decrease the labor supply. Due to its high costs, a UBI might also lead to cuts in the social safety net and increased taxes, and in turn, augment economic inequality. Under conditions of heightened inequality and job loss, a UBI might be the best option for the moment — but it is an option that policymakers can avoid with proactive investment in and strengthening of social programs.
In contrast to means-tested social policies like Temporary Assistance for Needy Families (TANF), a federal cash assistance program administered at the state level, and SNAP (food stamps), a UBI would be universal. Since people continue to fall through the cracks of means-tested welfare system, policymakers like Yang advocate for UBI, which they argue supports needy families with periodic assistance and no work requirements. It is clear that modern welfare is not as robust as it could be, with the maximum TANF benefit across the country still leaving a family of four 60% below the federal poverty line[3] — a line that has not been updated since 1963.[4] Another benefit of UBIs are that they are universal, so they not only forego eligibility checks, but they are significantly more popular — as evidenced by Social Security.[5] As the possibility of robots taking on repetitive tasks looms larger, thus displacing workers who performed those tasks at a higher cost, UBI seems like a logical response to a lower labor demand. But so far, total job loss to automation has only been between 360,000 and 670,000, a loss that is simultaneous to gains in the service industry.[6] While this is currently a good sign for workers who may simply need to switch industries, as robots become cheaper and more sophisticated, jobs in industries built on human connection, like the service industry, could be at risk too. A UBI could benefit workers forced into new industries, those hoping to build families amidst unstable employment, or even those who want to take on an entrepreneurial or educational investment.
Although most UBI proposals only pay citizens between $10,000–15,000 annually, both advocates and critics of UBI argue that it will affect labor force participation. Since means-tested welfare programs often disincentivize working or growing income due to income eligibility cutoffs, a UBI would provide people with needed cash assistance without the risk of losing benefits. For people who require consistent cash flow and rely on welfare for it, a UBI would enable them to participate in the workforce without fear.[7] Additionally, a UBI could allow people to trade low-pay work that they do not like for financially risky work that they do like, including starting a small business, taking on an artistic endeavor, or starting a nonprofit — all of which could reap significant financial rewards in the long run.[8] But some argue that a UBI would cause a decrease in participation because the income may be substantial enough to live off — disincentivizing workforce participation.[9] Nonetheless, fretting over freeloaders seems futile in the context of those who are unable to work that with UBI can have a source of income. While Yang’s proposed UBI still puts a family with two adults below the federal poverty line, consistent income prevents families from worrying about each day’s expenses — enabling them to plan ahead, re-enter the workforce when possible, and hopefully accumulate wealth.
But to effectively address poverty and stabilize families excluded from the workforce, a Universal Basic Income must be large. If the UBI is truly universal and is provided to every citizen, estimates put the total cost at roughly $3 trillion per year, a price larger than current spending on the entire social safety net.[10] A 2019 paper published by the National Bureau of Economic Research finds that “this is about 75 percent of current total federal expenditures, including all on- and off-budget items, in 2017… Thus, implementing this UBI without cuts to other programs would require nearly doubling federal tax revenue.”[11] Although UBI could replace other social programs, like health insurance, the earned income tax credit, food stamps, rent/housing assistance, and other cash assistance programs, these programs often cover costs beyond $12,000. For example, a single parent in Queens, New York, with three children could receive roughly $31,100 annually in benefits from SNAP, the earned income tax credit, and housing vouchers alone.[12] Combined with possibly lower workforce participation, the spending required for a UBI would require significant tax increases, disproportionately harming low-income families if the earned-income tax credit was replaced with UBI. Although a UBI might level the playing field in the short run, under certain (and plausible) economic conditions, a UBI might increase inequality over time.
While a Universal Basic Income is simple in design, universally administered, and does not rely on expensive and often discriminatory means tests,[13] it comes at the cost of workforce participation and public spending. For example, suppose robotic automation proliferates so quickly that the labor market cannot respond to workers needing relocation. In that case, a Universal Basic Income may be an effective means of efficiently distributing purchasing power across the population in the place of a wage.[14] Nonetheless, Universal Basic Income is an inadequate alternative to other social welfare programs and does little to address the root causes of income inequality in the United States. Although poor American families desperately need consistent, dependable, and ample cash assistance, welfare is so politically charged that only universal programs seem to survive amid Presidential elections and changes in technology. It is unclear what response is best suited for America’s uncertain economic future. However, it is likely one that enables vulnerable families to access support — even when they do not have the time or ability to navigate complex bureaucratic channels. It is also likely to invest in social programs that better every citizen, like education, healthcare, and childcare, which empower families and communities to build wealth. As conceptions of work, deservingness, and need change as rapidly as technology does, a robust welfare state may be what fortifies humanity’s place in the market — even separating robot from man.
[1] “Income and Poverty in the United States: 2019,” United States Census Bureau. [https://www.census.gov/library/publications/2020/demo/p60-270.html]
[2] Eduardo Porter, “A Universal Basic Income Is a Poor Tool to Fight Poverty,” The New York Times, May 31, 2016. [https://www.nytimes.com/2016/06/01/business/economy/universal-basic-income-poverty.html]
[3] “Policy Basics: Temporary Assistance for Needy Families,” Center for Budget and Policy Priorities, March 31, 2021. [https://www.cbpp.org/research/family-income-support/temporary-assistance-for-needy-families]
[4] Shawn Fremstad, “The official U.S. poverty rate is based on a hopelessly out-of-date metric,” The Washington Post, September 16, 2019. [https://www.washingtonpost.com/outlook/2019/09/16/official-us-poverty-rate-is-based-hopelessly-out-of-date-metric/]
[5] “Sighing for paradise to come,” The Economist, June 4th, 2016.
[6] “Free exchange: Will robots displace humans as motorised vehicles ousted horses?,” The Economist, April 1, 2017.
[7] Kelsey Piper, “the important questions about universal basic income haven’t been answered yet,” Vox, February 13, 2019. [https://www.vox.com/future-perfect/2019/2/13/18220838/universal-basic-income-ubi-nber-study]
[8] “Sighing for paradise to come.”
[9] Piper.
[10] Piper.
[11] Hilary W. Hoynes & Jesse Rothstein, “Universal Basic Income in the US and Advanced Countries,” National Bureau of Economic Research, February 2019. [https://www.nber.org/papers/w25538]
[12] Rachel Minogue, “Five Problems with Universal Basic Income,” Third Way, May 4, 2018. [https://www.thirdway.org/memo/five-problems-with-universal-basic-income]
[13] Mondaire Jones & Katie Porter, “Opinion: Means testing is bad policy and bad politics. Keep it out of the Build Back Better Act,” October 14, 2021. [https://www.washingtonpost.com/opinions/2021/10/14/means-testing-is-bad-policy-bad-politics-keep-it-out-build-back-better-act/]
[14] “Sighing for paradise to come.”
