Basic income advocates often talk about what a transformative impact universal basic income could have on society — but what issues and challenges will it actually solve? Jim and Owen share their thoughts on whether basic income is the solution to poverty, automation, wealth inequality, and more. This episode originally aired in February of 2018.
How has the economy changed over the last generation, and what do today’s workers have to contend with that previous eras did not? Jim and Floyd Marinescu, CEO of C4Media, discuss these issues and more on this episode, which focuses on basic income from the business perspective.
Owen: Hello, and welcome to the Basic Income Podcast. I’m Owen Poindexter.
Jim: And I’m Jim Pugh.
Owen: We’ve looked at basic income from a number of perspectives on this podcast, but one we haven’t actually delved into as much is the business perspective.
Jim: Yes, there’s some interesting ways to look at basic income that doesn’t necessarily come up if you’re focusing on it solely from more of a moral or pragmatic social program perspective. To delve a bit more into this, I sat down with Floyd Marinescu. He is the founder and CEO of C4Media and has been quite a longtime advocate for basic income specifically from that business perspective.
Owen: Here is Jim’s conversation with Floyd Marinescu on the Basic Income Podcast.
Jim: Well, Floyd, thanks for joining me on the program.
Floyd: Thank you.
Jim: To begin, can you just tell me, how did you first get interested in basic income?
Floyd: I can’t remember what the first trigger was, but I just know that when I first heard about it, I heard that there’s a way that you can solve poverty and also grow the economy, I’m like, “This is great.” I particularly became interested in it because being involved in software development, I can see what’s coming down the line with artificial intelligence and machine learning.
I also have a personal story along about globalization with my father and uncle. They lost their jobs in manufacturing in Ontario where Toronto is when China entered the global trade market in the 2000s. They could never have seen that coming. They had no idea. I remember one time I was at a barbecue with them when I was 17 wondering what I should do with my career, and they were like, “You should go into tool and die manufacturing because we’ll always need more metal parts.” I chose computer science.
Five years later, both of them are out of work because the industry contracted significantly. I think I became really worried because I see the same dynamic playing out now, both in terms of globalization and automation, and that’s what really got me more urgently interested in basic income.
Jim: It’s interesting, and I feel like typically when you talk about any sort of social program, advocates tend to have a personal story that reflects, “Oh, I had this particular challenge growing up. We didn’t have enough money for food. We were dealing with some sort of housing crisis,” and that’s a motivator here. It’s interesting, it seems like in the basic income is space you actually have people who are engaged in some of this technology work, and that is really the personal story. It’s seeing how either of themselves or someone they know well that the changing nature of work has already affected them.
Floyd: Well, there is that personal story for me as well. We grew up pretty poor and working class, and money was always a source of tension, sometimes even toxicity in arguments. I wish there was a basic income so that there had been more equality in my family and there would have been less tension. I personally can feel the fact that it seems like the economy is sliding in the wrong direction for more than half the population and their children will be going through what I went through. That’s definitely at an energy level something that drives me in this for sure.
Jim: Yes, so you’re getting both perspectives there really. I’m curious, again on a similar note, when most people advocate for basic income, generally they are either talking about, “Oh, we need to like look at this from like a social perspective”, lifting people up, or perhaps the more pragmatic humanitarian perspective, that this is a more efficient way of supporting people. But your argument is really on the business side. You see this as something that is actually going to help businesses. What are your main arguments on that?
Floyd: Well, there are arguments that are timeless, and I’ll go over those, and then there are arguments as to why it’s urgent. Maybe the urgent ones first although I’m sure your audience has already heard this before. I actually think that we’re in the middle of a multi-decade labor market correction. I use the term metaphorically, but I think it probably applies. A market correction that’s keeping wages– depressing wages effectively and reducing the number of middle-class jobs available to everyone in western countries.
I call it a correction because if you look at those graphs of money going to wages versus productivity, and you’ve seen how since the late 1970s, they used to go hand in hand together. People were getting raises every year as productivity was increasing then it stopped. Now for 40 years, a majority of working people haven’t actually had a raise in inflation-adjusted terms, and many are actually making less than they used to make.
To me, that’s a market correction and the cause of that market correction is automation probably primarily. We already have 40 years of automation that people don’t think about. There’s a lot of hype about AI, artificial intelligence taking out jobs. But the automation we already have, all the industrial robots that we already have, the software gains we already have.
I was talking to the General Manager of the Marriott Marquis in New York Times Square where we host a major event every year, and he told me that that hotel used to have 2500 people running it in the ’80s and now it needs only 1500. And that’s a hotel, it’s a fixed asset. Not many moving parts. My father told me that a lot of the manufacturing companies in Ontario that survived the competition with China only survived because they automated. If you go visit those plants now, you see industrial robots everywhere and far fewer people.
The problem is that the globalization of today is not my father’s globalization. No manufacturers are still losing jobs to China to my knowledge. Today’s globalization is about entry level even clerical work. I know 15 entrepreneurs that have virtual assistants in the Philippines because they cost three dollars an hour. Those are the jobs that are not being hired in their own hometown. Any graphic artist these days has to compete with people on Upwork from Eastern Europe and South America.
Today’s young people are in a far, far more unfair advantage than our parents were, and no one is talking about this. This is really serious. I kind of mixed the automation and globalization messages there, but these two are the number one trends I think that for 40 years we can already see the impact it’s had on the economy with pretty much the lower 60% of society falling into a more precarious check by check existence.
Even Ray Dalio, the billionaire hedge fund manager from Bridgewater Associates, released a report saying that from now on we need to consider that there are actually two economies here. There’s the economy of the bottom 60%, and the economy at the top 40%, which has done much better. The people in the bottom 60% economy have twice the suicide rate, can’t find $500 in case of an emergency, and are increasingly being structurally excluded from growth.
He says that this is causing a decline, a slowing of economic growth. If you look back at that the productivity versus wages gap, it’s roughly a trillion dollars a year in the US that used to go to workers that now goes to shareholders and executives. You can just imagine that trillion dollars if it was still going to workers would have been a much, much bigger– we would have had a much bigger economy. Wages would have been much higher.
These are the trends. A lot of people like to blame the demise of unions. Even Andrew Stern in his book — he was the president of the SEIU — he said one of the reasons he left the unions is because they couldn’t nationalize, and they also couldn’t go global. They’re structurally cannot cope with globalization or automation. I think it’s really globalization and automation.
But today we also see the transition of work to part-time contracts, more gig economy work, which doesn’t have benefits and generally is a form of competitive labor marketplace, actually occurring in labor marketplaces where everyone’s competing with each other.
Then the final trend I see that’s a big deal is this winner-takes-all economies now where companies like Amazon are absorbing huge shares of economic activity. Amazon will have 10 times the impact Walmart had on main street retail. I’ve heard projections that 30% of shopping malls will close within five years because of Amazon, and retail is the number one employer.
These are the urgencies for basic income. I feel that it’s time that as a society we acknowledged that these structural changes are happening, and this makes left versus right views about welfare or laziness or all of those things completely obsolete and completely beside the point. Those views reflect a 1970s’ viewpoint when wages were rising with productivity and when families real purchasing power was, in fact, higher than it is today. I think we don’t need to wait to see if AI takes out half of all jobs, we can already see the impact on the economy.
I was doing some research recently on the impacts here in Ontario, and I was actually amazed that since 1997, the number of people– the share of jobs, share of people in minimum wage jobs, not the number, but the share of them has increased fivefold. The number of people in low-income jobs has nearly doubled to 30% of all jobs according to some reports I’ve seen. This same trend is playing out in the US where you have the hollowing out of a lot of the second-tier cities in the middle of the country. People primarily moving to San Francisco, New York, London, and Boston.
And so you can just extrapolate these numbers: what happens if the share of jobs that are low income grow to 60%, or as Nick Hanauer who I follow a lot of his work — he’s the guy who did the Beware, Plutocrats, The Pitchforks Are Coming — he points out that the top 1% only have 5% of national income in 1980, now they have 22% and the bottom 50% is where the loss was, their earnings.
Imagine that if nothing gets done in 10 or 20 years, the top 1% have 35% of national income per year. Then you don’t have capitalism anymore, you have a feudalist economy. You just extrapolate the numbers, that’s where we’re going. In my opinion, basic income is the most scalable solution to that.
The other arguments I have about why it’s pro business are fairly timeless, but they kind of segue off of that.
Jim: I mean, you raised a really interesting point, which is oftentimes when we talk about automation, the conversation is what will happen — and whether it’s 5, 10, 20 years — with robots coming and taking our job. I think oftentimes people adopt this somewhat literal view of that. That either a robot itself or a computer program will just come and do your job. It still seems like, more so now, but there’s still limited imagination as far as, “Oh, could this actually happen?” So your point that you were making, which I think is an important one, is that we don’t need to look to the future, that automation has been happening here.
I also was struck by your noting about the low-wage job increases because I feel like that’s often something that people raise as a counterpoint. That if automation is happening, why do people still have jobs? Why isn’t productivity going up? If people are being forced into these low-wage jobs to have something that would really explain why that trend hadn’t manifested in a way that they might have intuitively expected if you’re talking about the robot coming and taking a more specific job.
Floyd: Exactly. The way the labor market changes with automation, it’s not that, as you said, it’s not that a robot comes and takes your job, knocks on your door. It’s more like over the years less people are needed to do this to do work as demand grows. Companies become more productive with less people. So GDP is up, population is higher, but less people are actually needed to do the work.
Here’s an example I think we’re going to see playing out. Let’s say that artificial intelligence gains replace a lot of work that doctors used to do. This is 100% being discussed right now. There are startups coming out of the Valley that are working on these problems. I’m sure your readers have heard that software that does cancer scans and X-rays is now more effective than panels of radiologists.
What you might have is, let’s say metaphorically, 10 doctors serving 1000 people but then 10 years later after new software gets adopted, a new hardware gets adopted, you still have those 10 doctors but now maybe you have maybe more like 50 technicians who are paid a quarter as much as a doctor just working with software and computers and carting them around to see their patients.
It might have been a requirement to hire another 50 doctors as the population has grown, and you’ve replaced that 50 doctors with a thousand personal support workers who just work with software, who get paid something close to minimum wage or a bit higher. That’s how it’s happened. The hotel example is evidence of that and all the manufacturing cases. That’s how it happens, and that’s what AI is going to do.
All the experts are saying that– I don’t think they’ll be no jobs, I just think the jobs will be– there’ll be more jobs that are low paying, and a lot people won’t want them. The only way to make those jobs actually work is if you have a basic income so people can choose to do that work while not living precariously and not living on a subsistence level. So I think basic income will make that work actually pay enough, in combination with basic income. That’s the future because it’s already happening.
Jim: You’ve talked about some of the urgent and dire reasons that we need to be changing the system now. I think you alluded to earlier that there are some perhaps more positive rationales that business might be interested in supporting basic income. Can you talk through your thoughts on that?
Floyd: I’m amazed no one talks about this. I’ve been running a business for 12 years, and we have over 7,000 software developers a year who come to my conferences in New York, San Francisco, London, China, and Brazil. We also have a news website for software engineers that has over a million readers a month. I’m very interested in the macroeconomic cases for these. I just looked into it a bit, and there’s some talking points that are just not there.
The first one is that it is an economic stimulus. I mean business can only hire in response to increasing consumer demand or purchasing power. If we want to grow the economy, we have to make sure that enough people can participate in the economy and buy things so that new businesses and the vibrancy of new startups, all that can be maintained. Quite simply, there’s been research shown that programs that put more money in the hands of those who have the least generate five times more return to the economy than corporate tax cuts.
The velocity of money in the US has been drastically affected since 2008. I think I saw Nick Hanauer put up a slide that the average dollar was exchanged 17 times in the year before 2008, and now it’s only exchanged five times in a year because wealth has been so concentrated in the hands of a few. Maybe it’s time that we engage in a demand-side stimulus like a basic income that directly brings people up to a livable level and stimulates the economy.
There’s real evidence now that this would work. There’s a program in Canada called the Canada Child Benefit. It’s something that even some Republicans in the US were suggesting that we do something like that in the US, which is encouraging. The Canada Child Benefit is an unconditional, no-forms-to-sign cash transfer program for families. I think it ranges from a hundred dollars a month all the way to $530 a month per child per household depending on their income level.
Imagine that a family in poor circumstances with two children could be receiving over a thousand dollars a month, no strings attached, from the government and which helps them make ends meet.
This program not only has it brought– it was launched in July 2016– not only has it brought 300,000 children out of poverty according to Justin Trudeau, the Prime Minister, but the Governor of the Bank of Canada, Stephen Poloz, said on record that this program resulted in a 0.5% GDP growth in 2017. That’s pretty amazing. Half a percent of GDP growth. As you know, GDP measures the exchange of goods, production of goods. Obviously, if there’s more goods being exchanged, more jobs are created.
I’ve noticed personally that when looking at unemployment graphs, the five-year graph of unemployment in Canada, the unemployment rate was pretty flat for three years. Literally the month after those payments began, you can start to see the lines starting to go down. Now we’ve had two years of non-stop decrease in unemployment. Now that’s happened in the US as well, so there might be something going on, but it’s unusual how those payments seem to correlate to dislodging a flatline in unemployment.
So it is an economic stimulus. I’m sure your readers know the Roosevelt Institute in the US did a projection that the US economy would grow by at least 13% within a few years if there was a basic income, adding two and a half trillion dollars to the annual economy, creating over four and a half million jobs.
It’s also would be a great stimulus for rural and small towns. Big cities is where taxable economic activity is concentrated. You can imagine that if there was a national basic income that it would effectively be like the big cities investing in the small towns because the basic income would be the same amount probably all over the country. That would make small towns more affordable, bring in fresh cash, result in a lot of investment.
We’ve seen that the rural town of Dauphin in Manitoba in Canada, when they had a five-year trial in the ’70s, we can see a lot of evidence, a lot of stories about people buying tractors and farming implements, just taking themselves one step up in their lives and spending more in the economy. In addition to social benefit outcomes like hospitalization visits went down 8.5%. So it’s an economic stimulus.
Another point is that it’ll help us manage recessions. The biggest problem during a recession is consumer confidence. In that regard, basic income is an automatic stabilizer. If people aren’t afraid of what they’re going to eat tomorrow, they’re probably not going to curb their spending as much. That’s something that I never heard anyone talk about, but it seems like such common sense. Especially when you’re talking about how a basic income would meaningfully reduce fear and anxiety for at least half the country.
The other half, they have more money, they won’t have that much fear. But I have to say even myself, running a business, doing well financially, I worry that one day I could lose everything. Just knowing that the check is coming in every month is like an antidepressant. Actually, Evelyn Forget who did the analysis of the Dauphin, Manitoba experiment has this great article about how UBI would be massive for mental health because it functions as an antidepressant because people won’t be stressed.
I know that from my own personal example because in my mid-20s, I took my life savings at the time I had. I made some money from stock options in a startup I was in, and I down paid a rental property. The income from that rental property massively reduced my sense of stress and anxiety. I knew that no matter what, I’ll never have to starve or worry about shelter. There will be just enough money to get by even if it’s a small amount. With that confidence, I quit a high paying job and started my business, and now I employ 50 people. The basic income for me was very personal.
I want everyone to have that lack of stress. You don’t have to be a millionaire to experience the absence of strain and stress. You just need $1,000 or $1,500 a month that you can rely on, and that’s all it might take. Imagine a fearless society where no one has to worry about that, where no one’s voting for populists who are promising them stuff because they’re already feeling a sense of well-being. That’s what’s on the line here, and that’s why I’m so excited about basic income. A few more points, but you want me to go through them all?
Jim: Go ahead.
Floyd: Another point is it will unleash entrepreneurship. This is why the famed Y Combinator, the president Sam Altman says that when he went through Y Combinator, it was like getting a basic income. He got $12,000 a year, interesting number there, which they used to eat and live.
I think basic income will unleash entrepreneurship. Now, it’s not going to create entrepreneurs, I think entrepreneurship and that kind of risk-taking is an innate quality. Imagine all the potential entrepreneurs that are held back by life’s circumstances, afraid to take a risk, just trying to make ends meet for their families, who could then take risks and do this. It’s really about helping people have time and mindshare to create things. Imagine if people were always creating. That’s something we can get from this.
For those who are not entrepreneurs but who want to better themselves, it would reduce the risk of retraining and relocating. We need a more educated workforce. First, let’s help people have the mindshare to think about the future and be able to take time to go and retrain. I’d rather people retrain themselves or go on Khan Academy or Udemy than some government retraining program where who knows what they’ll come up with.
Let’s decentralize, let’s trust the free market, so that people can go and retrain themselves or be able to take a risk by relocating to where the jobs are. I’d imagine myself if I was in poor circumstances and I had to go across the country to find work, I might hesitate if I didn’t know what I would eat the week I got there. Basic income will really help lubricate the system so people can be more mobile.
The final point is that a basic income could enable an entirely new economy to emerge. I call it the volunteering economy. What that means is, let’s say someone wants to voluntarily work for you for five dollars an hour because they believe in what you’re doing or your cause. Maybe it’s not even a business, maybe it’s some sort of community service. Or maybe it is a business and they want to work for you and maybe get a profit share or just help.
Well, none of that is feasible right now. Imagine economies, a number of businesses, organizations, community groups that would exist if there was a basic income in place so people could voluntarily choose to work. Even if the amount they’re being paid isn’t necessarily, wouldn’t necessarily be a living wage by traditional measures. Imagine it, if they’re choosing to do it, then they’re not under any coercion.
This is why, from a business perspective, basic income is better than minimum wage increases, and it’s also better than EITC or similar programs that exist in the UK or in Canada because those programs don’t compensate for caregiving or unpaid work like community service or entrepreneurship. To me, basic income is just a much better approach to solve those problems.
Jim: For me, the thing that really resonates is, what could be unlocked around entrepreneurship? If you look at who’s currently able to start a business, the vast majority of people have some substantial means already, either personal wealth or family connections. They’re in a position where they can afford to take the risk. Because if you’re not sure if you put food on the table, how on earth are you going to actually go potentially months or even years without actually getting a profit from your new business idea?
Seeing how many potential entrepreneurs out there could be unleashed with this, I would say that is definitely something, both honestly from a business and equity perspective, that I feel like is very compelling.
I’m curious, you’ve been doing this advocacy work for a while now and talking to people in the business space. How are they reacting to this? Is it resonating with folks? Are there certain folks that seem to get in and others who don’t? What has the reaction been?
Floyd: I find that it’s mostly positive, particularly for people who came from humble backgrounds. They know how hard it was, and they can imagine how much better they would have been if they would have had a basic income back from day one. I would say it’s probably 70% positive, but people have questions like how do you pay for it and such. The ones that were more negative usually are responding from ideology and concerns about disincentivizing work. Usually, those who are open-minded, if we talk about it enough, then they usually see that it doesn’t disincentive work.
Although most of the people I speak to are more the younger generation of business owners, people under 45. I haven’t spoken to any Fortune 500 people that have more of an old industrial mindset. But mostly positive, I’m actually quite pleased.
Jim: Has there been any big surprises for you in your advocacy here? Reactions that people have had, or the types of folks that have wanted to get most engaged?
Floyd: Right now, what I’m mostly surprised by and disappointed by is the decision of the Doug Ford government in Ontario to cancel the Ontario trial. To me, it seems like a political move. My personal theory is that– they canceled it before any data was even gathered, so they had no reason to cancel it. I think that it was actually a political move because probably the trial would have generated a lot of positive press over the next two years until it ended, and all those good news stories might have been used against the party at the next election should they choose to not run and not even talk about basic income.
It’s kind of unfortunate that in Canada we have the Progressive Conservative Party at the provincial level, which is supposed to be progressive, and it used to be progressive. It’s quite exciting that even in Canada even conservative parties are progressive. Unfortunately, that seems to be changing, and it’s just disappointing because I think basic income actually is a progressive conservative idea. It almost passed in the US under Nixon, passed in the house. There was a time when conservatives actually cared about solving poverty and had no issue with taxation, and now that seems to have changed.
I think that’s actually what happened, and I’m very surprised. I’m trying to do whatever I can, like organize other CEOs together to sign a letter to the Ford government to urge him not to do this. The big surprise I’m seeing is that– I have a strange hobby. I like debating people on Facebook about basic income especially conservative people. I truly believe that this a conservative idea, and what I find is that people just don’t know those trends that I mentioned at the beginning of the interview. They don’t know what impact globalization and automation has had on their jobs.
I believe that people are good, and if they understood that working people actually don’t have access to enough good paying jobs anymore, that they’d change their mind, but they don’t know that. Most people on the right who are against basic income on laziness or entitlement reasons, I think they just don’t know. They literally don’t know that the labor market is not what it was in 1970 when most people could get a pretty decent job fairly easily and paying really well. Now it’s just not the case.
Jim: You brought up a good point there, which is this interesting intersection of appeal that basic income may have around — particularly if you’re looking at it from a business perspective — that you could potentially get some more conservative folks to be behind it. While at the same time you have folks on the left who see this as a potentially transformative idea in how it might include people in the economy.
Something I’ve encountered in our work at Universal Income Project is that while you can make both of those arguments, when you try to bring folks together, it doesn’t always go terribly smoothly. There is a lot of distrust, particularly in this moment in the US, maybe it’s less so up in Canada. When you have people coming in for different reasons, different value-based or ideological reasons, it can be a challenge to form a larger coalition. I’m curious if that’s something you’ve thought about it? Is it something you’ve encountered in your work so far?
Floyd: Yes, it’s definitely something I see. I haven’t encountered it because I haven’t done any actual political stuff yet. All my work has been in the grassroots and in my spare time since I’m still running my business. On that note, what I’m most excited about now is Andrew Yang’s campaign in the US to run for president. I think the one issue that could actually cut through left versus right is automation.
The fact that automation is replacing jobs and the people get educated on the fact that automation has already been replacing jobs and the stuff we already talked about, then the urgency is there. When the urgency is there, we can cut through all those discussions.
So that’s really important. That’s why also for myself, for discussions I have, I tend to start with these trends that are changing the economy and, unfortunately, use a bit of fear because people respond well to fear. Although personally, I’m much more excited about basic income for the kind of society we’ll have after we have it. Right now, we need to defend the middle class, and we need to defend our way of life, and I know of no better solution than basic income.
Jim: I would say personally I have some mixed feelings around that just because there is– you do have that extreme, the fear side, and the potentially massively aspirational side, and can those actually work well together or do you put people in different camps? I mean it certainly seems like if we can get more people to be recognizing the need for change, then that does open up new doors.
Floyd: That’s why I like what Andrew Yang is doing very much, I’m doing whatever I can to help him. I actually really like also his proposal that this be taxed through a new Value Added Tax. In Europe, the Value Added Tax is 20%. In Canada, it’s 5%, federally, it’s called the GST. In the US, there isn’t one.
What I like about the Value Added Tax is that it doesn’t touch income tax, so no one has those knee-jerk reactions when they imagine losing more of their income. A Value Added Tax also promotes conservation. If you can do more with less in your business, you’ll pay less Value Added Tax, that’s how the tax works. As opposed to income tax, which actually penalizes if you’re very efficient because then you’ll make more income in your business and pay more income tax.
Another thing is that all the experts are saying– all the futurists like Elon Musk and Ray Kurzweil, they’re all saying that productivity will increase exponentially with so many new technologies coming and prices will get very, very cheap. To me, a Value Added Tax harnesses productivity. It tracks to productivity much better than income does. If a value-added tax is in place, then those exponential productivity gains will be able to contribute to society and contribute to the purchasing power and the livelihoods of most of society, which is why I really like– Andrew Yang calls it a dividend.
Why can’t capitalism pay a dividend? What’s the point if it can’t at least pay dividends to keep people solvents at some basic level and maintain sustainability? Maintain renewability. We use that word renewables in the context of the environment, but the economy is a system as well. It’s a complex adaptive system according to new economists, and it’s not renewable right now because it’s trending towards feudalism now.
If we had a Freedom Dividend, as Andrew Yang calls it, paid for by productivity to me it seems like a very logical way to harness exponential technological growth to make capitalism renewable and sustainable.
Jim: Taking the winner-take-all direction we’re and actually creating a collective component to success basically?
Floyd: Yes, harnessing it, harnessing it. If Amazon is going to be the sole shopping place for the whole country, they should pay based on a Value Added Tax. There’s another trend I didn’t mention is that these days, some of these large companies, the financial incentives are no longer profit, they’re share growth—they’re valuation growth in their shares.
The whole venture capital movement now is much more interested in growth in share value than interested in profit. Our current taxation system that our civilization is based on is based on primarily profit taxing because capital gains is laughably low, as even Warren Buffet says, “It needs to be increased to a minimum of 30%.” When these companies are becoming the global winners, eating up the whole market in this winner-takes-all manner like Amazon, and they’re not actually making a profit, then the system is broken. The Value Added Tax would correct for that.
Owen: That that was Floyd Marinescu, founder and CEO of C4Media, on the Basic Income Podcast.
Jim: Floyd definitely had a different set of arguments than you typically hear when talking about basic income. I feel like the urgent ones that he described, those tend to align more closely with the conversations that often come up particularly around the forward-looking risk of automation that we think may be coming down the road and also how that’s affecting us today.
As far as more specific economic ones, we’ve talked about that a little bit, but it’s certainly– even some of the same analyses when you’re thinking about what impact that has from the viewpoint of the business leader, it takes on a new form it seems like.
Owen: Yes, I feel like this is an underplayed argument in the basic income space, and I certainly include myself in that as well, just because this is a direct way that people would be helped and the economy would be helped. It’s something that people respond to very directly. When you make a moral case, sometimes it doesn’t connect with people in the same way as opposed to something that would just make their lives better on a daily weekly basis.
Jim: I think that’s true. I do think, and we’ve certainly talked a lot about this in the past, that when people talk about basic income as a bipartisan issue, I think warning lights go off for me. Because I think if they’re saying this is left-right, and you have some folks who want to lift everyone up and the folks who want to– really their main goal is cutting their social safety net, I think that even though both may support “universal basic income”, we’re going to end up with some very clear misalignment once we get to a certain stage in the process.
But if you’re talking about forward-looking business leaders who are supporting a policy that ensures everyone participates in the economy, I don’t know, maybe there actually is an unusual coalition that could come out of that with those folks interacting and those people advocating for actually the same policy.
Owen: I think the idea that there are people with great business ideas and who have things to contribute, but they need to make their rent in the next two weeks or else they’re screwed. I think that that can connect to a lot of people. I also, on a different note, liked how much emphasis he put on globalization because we’ve kind of baked that in in our thinking about the economy. It’s something that people don’t talk about too much, but it’s a major reason why people are as economically insecure as they are at least in the United States right now.
Even if automation does not turn out to be as big a factor as people think it will be, we already have this major factor of globalization which could get even stronger as more and more of the world comes online and we’re able to do more and more remotely.
Jim: I think if you zoom out far enough, one could argue that globalization is actually a specific manifestation of automation. We wouldn’t have globalization without the technology to actually be managing those communications, those operations around the world. So that, while it’s not the kind of micro automation of something coming and disrupting a particular job, it is another instance of technology disrupting the traditional model of work, and that it’s clearly something that has been happening for decades.
One other thing I’ll add is, I do think that getting back to who is in this space, who is actually working on policy, something that is key that has struck me in multiple points in my work on basic income is still making sure that the people actually designing the policy are the ones directly affected.
I think that there’s fantastic potential for business playing a leading role in pushing forward policy, but at the same time making sure that what the actual policy is, is being figured out by those who are in poverty, by those who are dealing with the racial injustice of our current system. So that what we end up with is something that is going to lift those people and not unintentionally leave folks out as has happened often times in the past.
Owen: Alright, that will do it for this episode of the Basic Income Podcast. Thank you to our producer, Erick Davidson. Please subscribe on Apple Podcasts or the service of your choice. We’ll see you next week.
In this episode, which initially aired last October, Jim and Owen answer listener questions from how to pay for basic income, which country will implement a basic income first and how we will get there. You can send your questions to the Universal Income Project on Facebook or Twitter, or tweet at Owen (@owenpoindexter) or Jim (@dr_pugh).
Owen: Hello and welcome to the Basic Income Podcast. I’m Owen Poindexter.
Jim: And I’m Jim Pugh.
Owen: A while back we asked you for questions about the basic income, and a number of you responded. In this episode, we are just going to go through a few of those.
Jim: Unfortunately, we’re not going to be able to get to everyone’s question, but we did have a few that we thought would be good ones to start with. Here goes.
Owen: Alright. The first one is from Abigail Irwin, it came in through Facebook, “Here is the one big question I keep getting: how is it going to be funded?”
Jim: I would say for me as well, this is a question that people ask all the time. Since we’re talking about such a big program, people are naturally curious about, “Alright, where does the funding come from here?” One thing that I’ve mentioned before that I think is really important to remember is a lot of the conceptions we have right now about what the government “can or cannot afford” are really not based on reality.
That if you look at our economy and how much it’s grown over recent years, there’s actually so much money out there. Our Gross Domestic Product over the last 15 years has grown by four trillion dollars. Just taking a big picture snapshot, it’s important to know that there is money out there.
Owen: Yes and on top of that, I’ll say that while I think it’s important to talk about how are we going to pay for things, the government is very willing to drop billions of dollars on some programs without having this discussion. It’s only around new big programs where we do say, “Okay, well, where is that money going to come from because we haven’t already baked that in.”
Jim: We do see often around things like military spending, spending tens of billions of dollars ready at the drop of a hat is not uncommon, but as soon as we talk about billions or even hundreds of millions of dollars for social programs, people suddenly get very nervous about how we’re going to actually afford that.
Owen: And getting more into, “okay, how is it going to be funded?” — obviously, there are a number of ways you could do it. If you structure it as a negative income tax, you could just have a tax that runs backwards essentially. At a certain income level, you receive money instead of pay money in. That’s one way to do it where you don’t have to touch anything else.
Jim: Something I would add to that is, with negative income tax, one concern that I know people have is that if you’re actually not giving the same amount to different people, that could complicate the logistics figuring out, “alright, how do we actually assess someone’s income in the moment and decide alright, how big is the check we mail to them?” You can actually accomplish exactly the same thing using the tax code. You can structure it so that you give everyone the same amount of money every month regardless of how much they’re making but then make sure that you’re actually clawing back more of that money earlier on, based on how much they’re making when you’re actually assessing taxes. The same way you do now as far as withholding from paychecks.
Owen: Right, and just to offer a crude version of that, you could impose a flat tax and the revenue from that would just be turned into a dividend that would go equally to everyone. So everyone is paying the same percentage of their income into the basic income fund, but the way it works out is that at a certain point, you are paying and receiving about the same amount, and everyone above that ends up paying more, but they still get the dividend.
Jim: To give some more specific, since I want to actually make sure that we do give an answer to this question, there are actually a lot of different ideas for how we fund this out there. Depending on who you ask, you’re going to get different answers. Some of the most common ones that I hear proposed, one is the idea of — I think, particularly as the starting point — looking at the Carbon Dividend.
We’ve talked about that in the past. There was a proposal in California. There is currently, in fact, a campaign in Washington, DC around taxing carbon and paying out to revenue that comes in as a universal income, as universal dividends to people in the region. That could at the very least provide us with a powerful first step towards basic income by saying, “alright we’re setting up the system that gives everyone equally regular payments of money.”
Owen: I think that Carbon Dividend idea is my favorite in this whole space because it does start to address climate change as well. It takes this idea that we have shared resources, in this case, the air and the environment and that we are all invested in this whether we want to be or not. By taxing the use of the environment essentially which is a shared resource then we can all benefit from it.
Along the same lines, though very different, is the Financial Transactions Tax. That’s another one that gets thrown in periodically. We all benefit from the infrastructure of our financial system, and some businesses and people use that quite a lot to conduct business, trade stocks, whatever. By having just a very small fee on financial transactions, you could also do the same thing and fund the basic income.
Jim: Another one that often gets discussed is the idea that a Land Value Tax, where you’re assessing the value of any given piece of property that either a person or a corporation might own, and then saying, “we’re going to set some low level of taxation so that every month or every year, you are paying a certain amount based on the value of that piece of land.” Not just the land itself, but what’s actually on the land.
One thing that I think is really interesting about the Land Value Tax is it actually starts to get closer to the idea of a wealth tax. Something that is taxing not just how much money people are bringing in, but how much they actually own. Land isn’t a perfect measure of someone’s wealth, but it tends to be pretty close a lot of the time. That could help not only with providing the support that you get from basic income but also to share prosperity and share wealth across the country by really looking at that as the source of the funding.
Owen: Right. I think this is an important concept because while income is easy to track, or easy enough, a lot of the disparity that we see in the world is through wealth, and an actual wealth tax is very hard to administer because unless you have some way to track all forms of wealth, people are going to be able to move it around to not be taxed. But land is always there. You can’t pick it up and move it somewhere else. It does tend to be a good proxy for a holding place for wealth, especially in California, where we are.
Lastly, we can touch on general progressive taxation. We mentioned the income tax before but it doesn’t have to be a flat tax. It could be a progressive tax that increases as you go into higher income levels. There’s also a capital gains tax and perhaps others that you could mention.
Jim: Yes. Touching on the capital gains, right now we have the level of that set considerably lower than income. What that’s effectively doing is saying, sitting on wealth, you and the amount of money you get from that, you’re actually paying less in taxes and someone who’s working for the money.
Owen: You see those incentives pretty clearly in the market.
Jim: Right, exactly. That’s actually encouraging people to hoard rather than to spend. Also, again, if you look at the various campaigns that are going on around different policies, you’ll hear people talking about closing tax loopholes as well, particularly for corporations. There’s a lot of ways that companies are able to avoid what is the supposed tax rate that they might owe, due to how complex the tax code is in many places.
Owen: Hopefully, that gives you a sense of how we might fund the basic income. There are a lot of paths to do it, a lot of different sources you might look to. It should be said there’s no one answer to this. I’ve said this before the first step in creating a basic income is deciding that we want one. Once you have that destination, there are a bunch of paths to get there.
Jim: Right. I think it’s important to remember that oftentimes when we talk about these big bold policies, we know they’re going to cost a lot, but in most cases, we don’t necessarily have to go through all the math right upfront. It’s important to just know that yes, the funds exist out there. Let’s think about what this is going to do for people and then if this is actually something that’s going to help folks, let’s fight to make it happen.
Owen: Okay. Next question comes from Darcy Lengthier — hoping I’m pronouncing your name right, Darcy. “Which country will be next?” I have a couple guesses, and they’re pretty unoriginal.
Jim: Yes, we’ll probably have similar answers here. I would say any country that’s currently doing a pilot for basic income is probably pretty high on the list for ones that have potential to enact one. We talked about this before, but Finland launched their pilots in the last year. Ontario in Canada just launched their pilot. We do have the pilot happening in Oakland through Y Combinator, but it’s a little bit of a different situation since it’s a private entity funding it. I wouldn’t read quite as much into that as these programs that are actually being initiated by national governments and what that signifies as far as intentions.
Owen: I think my first pick in the draft would be Canada because they’re doing a pilot, and it feels like this federal government that seems like it would be ready to try something like this at least in terms of a Carbon Dividend or even like an Alaska style, natural wealth kind of thing.
Jim: That said, I think that there certainly are other countries out there talking seriously about it. Particularly for some of the smaller countries, if the people in power decided alright, this is a priority for us, if it was a country that was in a situation that have a reasonable amount of wealth or a lower cost of living for their population, they could potentially move pretty quickly to enact something.
Owen: I wouldn’t put Switzerland at the top of the list right now, but they have already had the referendum. It’s a small country with a lot of wealth. The math is a little easier there.
Jim: I think the big answer is, we don’t know. I think as far as what country will do pilots next, we haven’t talked about it much, but Barcelona is in the process of getting a pilot going. I do know there’s a lot of others that are in these discussion phases if not quite ready to launch.
Owen: The one last thing I’ll throw in there is, if you were to say the five most likely countries or the field, I’m probably going to take the field. I could see this coming out of somewhere unexpected or somewhere we’re not figured out right now.
Jim: Absolutely. Our third question is, “what kind of timeline are we looking at for America as a whole to implement basic income?” That came from Tim Kelly on Twitter.
Owen: Maybe December, January?
Jim: They’re just about there.
Owen: More seriously, I think one step might be to have this become more mainstream within the Left / Democratic Party in the US. If and when the Democrats take back power, maybe we could see something like a Carbon Dividend. I could see that happening in the 2020s, to give a decade.
Jim: If we can have it in 2020, I would be very happy. That is probably a little sooner than I was–
Owen: It’s a bit aggressive.
Jim: I would say, I generally tell people that if those of us who support the policy approach this right, 15 years seems like a reasonable timeline. That said, I think this is a kind of policy where it’s going to be very, very far off until it’s not. I think that there’s going to be nothing linear about the progression of the basic income movement. It’s going to be those of us who are in the space talking about it, getting more people hearing about it. Really writing the playbook for how this might happen, and then it’s going to be a question of when is that moment.
When is that moment when suddenly people are like, “Oh, we need something really different. We actually need to guarantee fundamental economic security for people. How do we do that?” If at that point, we have really set the stage for basic income, it could happen really, really fast.
Owen: I agree. I used to think of self-driving cars and trucks as the moment when everything was going to flip. I have actually backed off that a little bit just because they’re already on the road. This is already happening, and it hasn’t really catalyzed a discussion in a way that means policy is going to happen very soon, but I think we might see something at some point where one day Amazon lays off thousands or tens of thousands of workers. It’s them, plus Google, plus others, and it creates some amount of desperation where people are looking for a policy fix.
Jim: I will say, I don’t think we haven’t seen any significant amount of layoffs around self-driving vehicles.
Owen: Right. That could still happen.
Jim: It’s something that I know at this point, a lot of people think could be coming relatively soon, but how that will actually proceed? I think we’ll have to see. I will say I think I’ve been struck by how much people’s perception about the fundamental characteristics of work have changed in the last couple of years. That two years back, I felt like most people believed that the way that we do work would stay — I think stay is actually the wrong word because it was already shifting at that point, but could remain similar to how we did that in the 20th century.
Now, I think more and more people recognized that that model for how our labor space operates just is — there isn’t a way to go back. We are in uncharted territories here. We do need to be thinking more outside the box as far as what are the right policies to provide people with security they need.
Owen: I think just to add a little bit onto that. The moments that might catalyze something might just be something where we realize that we are in uncharted territory, the collectively “we.” Because I think we’re already there. We are already into the woods, and we’ve lost our map. But you don’t necessarily know that until some day, you woke up, and you realize you’ve lost the path. Sort of a strange metaphor for us [laughs].
I think it’ll be as much a realization of where we already are than something where we get to a point and, yeah, we are there.
Jim: We’ve meandered a bit from the original question here. So if we had to name a timeline, I would say I’m going to stick with 15 years.
Owen: Okay, I’m going to go Price Is Right style and just take the under on that one.
Jim: [laughs] 14 years?
Owen: Aggressively optimistic there. On the Price Is Right, you say one year and then you get all the years below that, the below years. This is a very dated reference, I’m realizing. I don’t know think that show is even on the air anymore. Haven’t watched TV in a while. Okay, related question, also the final question, “how do we get there?” So, Jim, how do we get there?
Jim: Well, this is asked by StepUpBG on Twitter, and we covered a little bit of this in the last question. I truly believe that the right approach to move towards basic income is to say that right now, we are laying groundwork. We are doing the things that make basic income more familiar, more understood and so that once we get that moment, we can say, “Alright, we got this. We know what this is. We’re ready to go. Let’s make this happen.”
Owen: I think you find, at least in America, that often the first time people hear of this policy — maybe less so, I’m getting this reaction less and less — but the most common first reaction is some amount of shock towards the idea of just giving people money unconditionally. I think people do need to sit with the idea for a little bit, and it needs to penetrate into more circles and become something that people are less afraid of talking about.
Jim: Right, I think part of that is just talking to more people about basic income and what it might do, having it be a more familiar concept that people they know and trust actually think this could be a really good solution and I think part of that is looking at what are the stepping stone policies that, in practice, can actually show people more what this is about. I think what to makes sense to go back to here is looking at the Alaska model and how the fact that everyone there is getting an unconditional payment every year is actually something that makes this whole thing make more sense to people a lot of the time.
Owen: Yes, and along that, I’m very excited about the trials in Ontario that just started and the upcoming one’s run by Y Combinator because those will be real trials, real stories, real people who are benefiting, so then it’ll be that much less abstract and that much closer.
Jim: I think those stories are going to be important and then what I would really like to see is for some city or state in the US to enact some small universal dividend in the same style as the Alaska model because I think that it’s that combination of hearing the stories of people who are getting full basic income and then yourself receiving this smaller additional income. Suddenly the intellectual leap between everyone getting basic income is much, much less than it is today.
Owen: I’m of the mind that $100 a month, even though we usually talk in terms of around 1,000, something like a 100 could be transformative for a lot of people and, if not transformative, would make a big difference. You would feel it.
Jim: If you’re scraping by, 100 a month is a game changer.
Owen: Yes, and speaking from my own experience, I wouldn’t say I’m scraping by, but I’d love $100 a month. [laughs] That wouldn’t be nothing.
So, how do we get there? I think a lot of what we’re already doing, and hopefully more trials, more support, more talking about it, more and more podcast episodes.
Jim: I think this is one where all y’all listeners can actually play a big role here. Again, make sure you are talking to people about this, looking for ways that you can push the idea forward. That’s actually what’s going to help make this happen.
Owen: So thank you to everyone who sent in questions. Please keep those coming, you can send them to myself @owenpoindexter at Twitter or Jim, you’re @dr_pugh there.
Jim: Or just tweet out the Universal Income Project, @UIProj on Twitter. We’ll get them there too.
Owen: Or you can find the Universal Income Project on Facebook as well.
Thank you so much for listening to the Basic Income Podcast. Thank you to our producer, Erick Davidson. Again, please tell your friends, talk about basic income, talk about the podcast. This could be a good conversation starter for them. Subscribe if you have not already on Apple Podcast or the service of your choice. And while you’re there, please do leave us a rating or review. It’ll help more people find the podcast. See you next week.
Momentum is building in Scotland to explore basic income as a policy that can be a centerpiece of the modern social contract. While automation is often mentioned as a catalyzing force in the basic income discussion, Scotland is looking at the policy more from a social justice angle. In this episode, Owen interviews the Head of RSA Scotland and Board Member of Citizens Basic Income Network Scotland, Jamie Cooke.
Owen: Hello, and welcome to the Basic Income Podcast. I’m Owen Poindexter.
Jim: And I’m Jim Pugh. One of the countries where there’s actually been quite a lot of progress around basic income is Scotland. There’s been a lot of political development, people are talking about new ideas, but it’s been a bit difficult to actually follow everything going on from the media reporting around what’s happening there.
Owen: To get an actual sense of what’s going on on the ground, I got a chance to interview Jamie Cook. He is the head of RSA Scotland and sits on the board of Citizens Basic Income Earth network in Scotland. Here is my conversation with Jamie Cook. Welcome, Jamie.
Jamie: Thank you for having me on.
Owen: To start, can you just tell us about the work of RSA Scotland?
Jamie: Sure. So we’re an international think and do tank. We’ve got a presence in about 90 countries around the world. Headquarters down in London, between 90,000 fellows in different parts of the world, and covering a broad range of different topics and ideas that we’re looking at. Particularly around civic impact, and how we can not just think about things but actually make a difference with it.
Which I suppose is partly where we’ve become particularly interested in ideas around the economy, the future of work, artificial intelligence and automation and obviously connecting all of those really, basic income.
Owen: Of course we’ll get into that in a moment, but first I’d just love it if you could ground us a little bit in the general political climate in Scotland. What’s that like these days?
Jamie: It’s really interesting time we have here. Obviously, 2014, we had a referendum on Scottish independence which the new vote, so the vote stay in the United Kingdom, won by 55% to 45%. Since then, we’ve had quite an interesting political context I suppose. The Scottish National Party are very much the dominant political force in Scotland controlling Scottish Government and most leaders of political representation. I think there was a feeling that perhaps after the referendum that was once in a generation votes and therefore we would go into a different context.
The referendum in European Union membership that we took, and obviously the fact that the United Kingdom has voted to leave the EU whatever that may end up looking like, at the same time as Scotland actually across every single local authority area voted to stay in the EU, I think created quite a different context. Again, showed a bit of a disconnect between the politics and the discussions in Scotland and the rest of the United Kingdom. That’s really kind of kick-started some of the debate again around Scotland’s constitutional future.
Just now, we’re at a position where we’ve just had the launch of a new growth commission by the Scottish National Party and Scottish government looking at what the economics of an independent Scotland could look like. I think very much signaling the beginning of at least a new discussion around Scotland’s constitutional future. At this stage I think it’s Brexit is so chaotic, and we’re not quite sure where it’s going.
I’m not entirely sure anyone knows what’s going to be the next steps or the next elements of discussion, but as it stands, I think there’s a very real chance we’ll have another referendum in our discussion around constitutional future of Scotland, whether that’s within the UK or actually as an independent nation.
Owen: Well, that’s really fascinating. We always have these conversations in a political context, but that one is very much in flux it sounds like. As you alluded to, the basic income discussion is alive and well in Scotland. Can you tell us what the status of that is right now?
Jamie: Sure. I think this reflects partly the fact that in Scotland, I suppose, wherever anyone stands on the constitutional debate, there is an understanding that as a small country, whether that’s independent or as part of the UK, Scotland is trying to find its place in the world, and how it can interact with other nations, how we can make decisions for some of the challenges we face here in Scotland. Really, what’s been quite exciting about that is opening up a space for considering more radical ideas and perhaps would be considered at other points.
For example, we’ve seen quite a push in Scotland around world-leading environmental change targets. There’s questions you can have around the implementation of those, but certainly the targets we’re aiming for are quite hard. We’re looking around new ideas for our Social Security and how some of these ideas can work in a different way in Scotland to the rest of the UK. I think that’s opened a really interesting space that basic income has been able to find a bit of traction.
I’ve been involved in it for a couple years now, and really the shift in momentum and interest during that period has been phenomenal. From something that was very much a fringe concept, as we’ve seen in other countries around the world, to one that actually in September last year the Scottish Government, so Nicola Sturgeon as First Minister, arranged within her program for governments, the outlining of her strategic or policy priorities for the coming year, basic income experimentation being one of those key priorities.
I think that’s been a massive step forward in terms of the engagement with political decision-makers but also the wider push within Scotland around whether we could explore some of the ideas attached to a concept like basic income really has pushed forward a lot of momentum. We’re at a position now where the Scottish Government has put money aside to support feasibility work by four of Scotland’s local authority, so council areas, to look at what basic income experiment might look like in those areas.
Glasgow and Edinburgh is our two biggest cities. Glasgow is the biggest, Edinburgh is our capital. Also North Lanarkshire and Fife, which are two areas that combine both commuter towns but also rural communities as well, it’s quite a diverse spread. We’re in a really interesting space of testing out these ideas and seeing where they might be able to go for Scotland.
Owen: And the conversation also in the US has really picked up in the last few years. What’s motivating that sudden surge over where you are?
Jamie: I think it’s been really fascinating having those conversations with our colleagues in the US, but I think there are slightly different pushes. I’m generalizing slightly here, but I think in the US there’s definitely been a huge push for you guys around the future of work, automation, artificial intelligence, how this is going to impact on jobs and how we see the next stage of, if you like, economic evolution. I think that’s partly why there’s been such a push and buy-in from some of the big tech leaders and so on.
I think here in Scotland, the pitch has been primarily from a social justice perspective; how can we create an economy and a society that is better balanced and better supportive to all of our citizens? I think there’s been a huge disconnect in many ways between political decision making in Scotland around social security and welfare in the United Kingdom. We’ve seen a system introduced under Universal Credit from the UK Government, it’s very much rooted in sanctions and presuming the worst of people. Really the idea you have to force people to behave in a positive manner or they will game the system.
Even though that isn’t written in any sort of evidence or, in fact, much to the contrary, it’s defined how our approach to social security has been in the UK over the last few years. I think within Scotland, there’s been a bit of a push back against that. I think as well within a Scottish context, there’s a recognition that in some of our communities, we have very long-standing challenges.
A city like Glasgow has been booming, has done a lot of really good renovation work over the last few years, is recognized on an international level for being a very attractive place to visit, to do business, and so on. Yet, there are also communities, particularly in east-end of Glasgow and the north of Glasgow, that have deeply entrenched issues around unemployment, around education, around health, well being, addiction, and so on.
I certainly have found with my conversations with a lot of community leaders and local authority representatives, that there’s a realization that we’ve tried to do the same things over and over again and they haven’t made those changes. In fact, we can’t just look to incremental change anymore to hope that the economy will pull everyone up with it. Actually, we need to try something quite radically different.
I think basic income has therefore offered space to challenge and to debate some of the norms or the expectations around the economy and around society that perhaps we’ve taken for granted for several decades.
Owen: That starts to get into what I wanted to ask you next, which was, if you have this goal of a more balanced society where people are a bit more equal, why is basic income the answer as opposed to say a jobs program or other social benefits?
Jamie: I think there’s several reasons that. One is there’s almost that kind of philosophical element to basic income and the recognition of us all having rights, connections, responsibilities, and opportunities as citizens. Actually, taking away from the idea that what we receive or give in to society is purely based on our economic activity. Actually, all of us, every single one us citizens, are entitled and deserve to have an element of security from that wider system that we’re in.
I think that recognizes those who’ve gone before us. The cliche about being an island, no man is, no woman is, we all are based on those who have come before us and those who come after. I think there is that recognition of having a better connectivity amongst society. Probably, and I think in a Scottish context, we shouldn’t over exaggerate these ideas of being more socially progressive as a nation than other places, I think we try to and that’s not always borne out.
But I think the political environment lends itself to the type of discussions around community involvement and connectivity and social responsibility that are sometimes harder elsewhere. I think though as well, there’s a recognition about the way that the job landscape is changing. Actually, the very nature of work is and should change. When we see the growth of insecurity, when we see the precarious lives that people are living, there are traditional ways we’ve approached that.
The social contract in the United Kingdom we created in the post war period, in response to Beveridge’s giants that he identified within the society, that we had to combat, we created the NHS and all our other fantastic and vitally important social security and welfare systems, but actually, they need to evolve and adapt to a different world were in now. There is a recognition that that’s an important space for us to start to get into.
How do we create a flexibility? As a small country, I mean Scotland is a very small country. It’s one of our strengths and one of our challenges where we have a smaller population than London does. That gives us a great flexibility, but it’s only a flexibility if we are able to give security and the ability to change and adapt to our citizens. There’s partly a recognition within that of this is a system that gives people the opportunity to grow into try new ideas and respond to the opportunities and challenges that arise for them.
Owen: Along those lines, there are a lot of different versions of basic income that you’ll hear proposed, from a straight universal basic income to a negative income tax, to a carbon dividend, or a sovereign wealth fund. What do you think might be the most feasible and best fit for Scotland?
Jamie: I think for Scotland, it’s funny, in some ways when we talk about the universality of basic income, you can sometimes get a bit of a instinctive negative response to that in Scotland. Because there is a feeling of, why would we be giving money to people who have more money than they need already? One of the important things we emphasize within all of our discussions in Scotland, is the basic income is not a policy that can operate in isolation.
For me, it’s a foundation stone to a new social contract. We wouldn’t introduce a basic income in Scotland with nothing else alongside it. It would go alongside reforming the tax system. It would go alongside, for example, looking at rent control, because if you don’t introduce some control of our own rent, our basic income would just vanish into the pockets of landlords. It would go around looking at the current measures we have in place for a minimum and living wage, for example.
That’s an important element whereby we look at that, and actually the universality therefore is very attractive. I find it very fascinate — I find it funny when I talk at quite a lot of events, sometimes people will stand up and shout at me at the end and say, “Basic income is a policy that Hayek and Friedman supported. You’re just trying to destroy the welfare state,” which I’m quite happy to defend the fact that I’m not.
The negative income tax as variation upon or way to approach it, hasn’t had the same resonance. It has a lot of negative connotations within the Scottish political context because of some of the proponents behind it previously. I would expect if we were to see success with this moving forward, and I think we have a very strong opportunity with the work we’re doing just now to really push towards basic income as a national policy in future years in Scotland, if we can demonstrate the evidence of success, I would expect to see that on a universal level.
I would expect to see it across society, because within the Scottish combination and political environment of basic income being both policy that supports individual decision making, but within a wider social context. It’s not one or the other. It doesn’t ignore the individuals, but also doesn’t ignore the fact that society does exist. That’s probably the most natural way that we would see that fit in Scotland moving forward.
Part of the interesting element of the experiments: one of the things I would give the most credit to the Scottish government, and to the First Minister, Nicola Sturgeon for, is the fact that, when you see a policy that suddenly picks up a lot of interest and momentum, and quite frankly fashion in some ways as basic income has, which is great and we’re really excited about. It’s very easy, I think, for a political decision makers, especially leaders of a country, to go one of two ways. Either they throw themselves into wholeheartedly and this is the answer to all their problems, which is not helpful or sustainable, or they reject it because it’s just a popular decision.
I think actually what’s been really positive to see from Scottish Government from the First Minister, is that what they see the popularity showing is that basic income is worthy of being explored further and being explored within a Scottish context, but with global conversations. They’re not throwing themselves into saying this will definitely be the policy in Scotland moving forward, but they’re also giving the space for us to experiment and explore and see what kind of implications this might be able to have for Scotland.
I think that gives us a really interesting space and opportunity and environment, that we can actually create quite a Scottish specific and targeted version of the policy in many ways that will work within a particular context that we have here, but also can learn from what’s happening in Finland and Stockton, California and Ontario and various other places just now as well.
Owen: You started to get into it there, I’m wondering what the public reaction has been to this whole basic income discussion. Do you think people are generally supportive?
Jamie: I think it’s getting there. I think one of the biggest things we need to do over the next year or so is really work on that public engagement. I think there’s probably still to big a proportion of the Scottish population haven’t engaged with the context yet. What I found in doing a lot of public speaking and public events and workshops and so on around the topic, is within a Scottish context you tend to get one of two reactions.
I think we’re lucky in Scotland in that we have a political context where we’ve had quite an open space to start from, maybe more so than in some other countries. For example, after the independence referendum debate, I think you had this huge growth in civic and citizen engagement in politics around the independence referendum. Registration for voting the referendum was not far shy of 100%; a huge turnout, people engaged in events.
I think when the referendum finished, people wondered where to go with that. Some people joined political parties, but I think for a lot, they were looking for that idea of a better Scotland. Whenever they sat on the constitution that was what was motivating them. I think therefore, we’ve had this great parts of the population we could tap into in a sense, who are looking for a progressive positive idea to really get behind, and I think basic income has lent itself to that.
Interestingly, the other reaction you find is quite a knee-jerk. I don’t mean this in a negative way, but it’s quite an instinctive reaction, which is when you talk about the concepts or giving people money and choice over what they spend it on, a reaction of, I know Jimmy in my street would spend that money on drink. He will spend it on alcohol, he will spend it in cigarettes, that’s not a good use of any sort of policy.
It’s a very quick and it’s very powerful and understandable reaction, but what I’ve also found with a lot of those reactions is it doesn’t take much of a space of discussing and allowing people to play with the idea and explore it. To also hear them saying, “I know he would spend it on alcohol, but I also know my cousin has been looking to set up a business and this would give her the spur to do it.” Or, “I know so and so who spent this time where they want to care for their husband who’s unwell, but they haven’t been able to do so because of financial reasons.”
I think it gives me the feeling that we won’t get 100% population behind this concept straight away, because you never do and that wouldn’t be sensible or indeed frankly [unintelligible] in many ways. I think there’s a real space there for us to be able to play with and challenge and experiment with the idea. That actually when we do that, and when we give particularly citizens the chance to do that instead of telling them this is a policy you’re going to accept whether you like it or not, there’s a real appetite in Scotland for doing that.
I think the more we can expand that and that’s — you mentioned me being a board member at CBINS, which is the Scottish affiliate of the Basic Income Earth Network, it’s one of the areas that we’re really looking at within CBINS is how do you train and empower and give the confidence to people to take these ideas out into the communities to discuss and challenge them. Frankly, maybe that will come back and push us in different directions, but that’s good. It’s a good way to engage the wider population.
Owen: What would you say are the next steps for basic income in Scotland?
Jamie: I think there’s a few elements. I think the biggest bet just now is the four local authorities who have been identified as the key test areas, if you like. They’re working. They’ve set up a steering group. They’re bringing in a kind of small staff team who will focus on developing a feasibility study into challenges and opportunities around experimenting with basic income in Scotland. I think it’s worth being honest about the fact that we do face challenges in Scotland.
As it stands, Scotland cannot introduce a basic income because we lack the devolution of fiscal powers and Social Security powers to be able to do that realistically. Currently out of the entire Social Security budget in United Kingdom, about 15% is controlled by the Scottish Government and Scottish Parliament. We have a realistic situation just now where we can’t do that forward.
If in the feasibility, for example, the financial costs of experimentation or the potential issues around the Department of Work and Pensions who run our Social Security Systems in the UK primarily, or Her Majesty’s Revenue and Customs who run our tax system, we are going to have work to really explore what are the ways that these could impact on any experiments.
Actually, therefore, what can we experiment with, what can we expect to be able to test and demonstrate, and frankly what do we have to be very honest about and say, “We can’t do that in this context.” That feasibility work is going to be to be vitally important and from an RSA perspective, we will be looking to engage with and support a lot of that and contribute to it. We’re looking at a number of complementary areas, but it will be a very important opportunity for Scotland.
I think the other thing that’s particularly important over the coming months and year really, is our engagement in Scotland with the rest of the world. One of the really exciting things with the basic income movement just now, so why we’re on this conversation just now is because it’s taking on a global dimension. Maybe taking on different characteristics in those areas, but we’re very much looking to learn from the rest of the world.
We’ve been working with our colleagues in Finland with a experiment underway just there. We’ve got events lined up in Scotland over coming months with leading basic income academics, Karl Widerquist from Georgetown University in Qatar, Evelyn Forget from Manitoba in Canada. We’re looking at how we can engage, I’m speaking at the Basic Income Earth Network Congress in Finland in the summer.
I think there is a really exciting space there for that global dimension; what can we learn and what can we share? I think that’s one of the things that’s been attractive in a Scottish context, but also shows us that we’re not just being individually radical here, we’re actually looking at something that’s taking on a lot of attraction and a lot of relevance in a number of different geographic and international contexts just now.
So I think the next year will be really exciting. I think it’s a space for us hopefully to identify the challenges to experimentation, but therefore ways around those. I think it’s definitely a space for us to start to design the process of what experimentation in Scotland would look like. I think with very much a strong focus and emphasis around the evaluation stage of that, the capacity building, the way to really build in wider society to the conversations where we’re having.
If we can take those forward, then I think a very exciting space for us to be able to put a package to the Scottish Government, to the Scottish Parliament, to our local authority partners and say, “This is our chance to really experiment and do something radical and exciting in Scotland.”
There are obviously political challenges to that, Brexit is a huge issue. If we are into a second referendum on Scottish independence that could have political connotations for this. I think by creating the model of what a basic income pilot or experiment in Scotland could look like, I think in the very least, we will create something very powerful that could be used in many different parts of world.
Realistically, I think with the discussions I’ve had and the feedback from various people, I think a very powerful opportunity, a real chance that we could do this forward and have a direct impact on Scottish policy moving forward.
Owen: Great. It’s a lot of exciting stuff. Those are the questions I had for you, is there anything else you’d like to add?
Jamie: No, I think that’s the crucial bits. I think it really is about that international dimension. I think we’re really keen to learn from what happens in Stockton, discussions you guys are having across California, I think potentially that impact around tech. For me, I feel we need a better synthesis between the element of tech AI focus, automation focus, there has been at points in the US with the social justice focus in Scotland because actually, I think what we need is both of those brought together better. Anything we can we can be learning and we can be contributing to in a global perspective, I think is definitely a hugely attractive particularly given the political context in Scotland just now.
Jim: That was Jamie Cook, head of RSA Scotland, on the Basic Income podcast.
Owen: I thought it was nice to hear that all these experiments, all the trials going on in different countries, it is a global conversation, especially within Europe, but also over here in California, these places are learning from each other and watching each other and it’s becoming a global movement.
Jim: That’s absolutely true. I think we often talk mostly about what’s happening here in the US, but we wouldn’t be having a lot of these conversations if it hadn’t been, well, a few years back for the Swiss referendum, but also the traction that this policy is really gaining in countries around the world. All of that adds onto itself and so I think altogether, that’s what’s led to more this snowball effect and you’re starting to see a lot more general conversation around the policy.
I also thought it was really interesting that his view is that automation is not the driver in Scotland, that it’s really about the social justice framework. I think that, certainly here in the US, the tech motivation is what you hear, at least in the news media for the most part. I think that’s why we feel like there’s more of a conversation today just recently. It’s really interesting to hear that in Scotland it is not about the tech it is about what could this do to really lift people up.
Owen: Yes, and that’s encouraging that the conversation is broadening to the social justice issue because automation provides a catalyst. Instead of us just coming out of nowhere and saying, “Hey, why don’t we just start giving people money”, it’s a motivating force, but there are so many more reasons to pursue basic income beyond that.
Getting back to how so many countries are doing this, it is hard to address every issue at once. Finland’s focusing on unemployment benefits. Stockton is more just about getting stories and lifting people up. Y Combinator, we’ll get a better sense of soon, but it is nice how because there’s so much going on, we are able to segment different parts of this conversation through different experiments.
Jim: Yes, absolutely. I think his view that this is really a foundation stone for a new social contract, and that he’s seeing other policies really going along with this to create that full picture of what it means to move into 21st-century social contract. That’s, I think, an exciting and smart approach to take.
Owen: I think that is where the conversation needs to go because that is an open question of what does the whole social safety net look like when you have a basic income and obviously there are a lot of opinions around that on both sides, but that is the next big question.
Jim: That will do it for this episode of the Basic Income podcast. We’re actually going to be taking a break over the next few weeks. We’ll still be releasing episodes, there’ll be some of our hits over the last year and a half. You’ll still keep hearing from us and we’ll pick up with new episodes in a month or so.
Thank you for listening. Thank you to our producer Erick Davidson. If you’re like what you hear, please do rate and review us on Apple Podcasts or the podcast service of your choice. Please do tell your friends about the podcast. We’re always looking to reach new people. We’ll talk to you soon.
An exciting new experiment, led by Greg Duncan of UC Irvine, is launching to explore how cash transfers affect early childhood on biological, cognitive, and social metrics. Duncan joined the podcast to discuss the motivation for the experiment, what it will study, and the research to date on poverty and children.
Owen: Hello, and welcome to the Basic Income Podcast. I’m Owen Poindexter.
Jim: And I’m Jim Pugh.
Owen: So there is an exciting research experiment that just launched in the US called “Baby’s First Years” that will provide new mothers with unconditional cash, and the researchers are interested in everything from how the money is spent to how this affects neural development.
And so recently, Jim got to speak with one of the lead researchers. His name is Greg Duncan. He’s a Distinguished Professor at the University of California Irvine. So here’s Jim and Greg discussing Baby’s First Years.
Jim: Thanks so much for joining us. Now, to start with, can you just tell us what generally the work you’re doing focuses on?
Greg: I’m an academic economist, and I’m interested in social policy of various kinds, and I’ve long been interested in the effect of inequality and income inequality in general and poverty in particular on the development of children.
And I think one of the things we’ve learned over the last 20 years from neuroscience is how important the very early years of life are, infancy and toddlerhood, because that’s the time when a lot is happening with kids brains. And it’s a period when kids are particularly susceptible to enrichment in their environment as well as insults in their environment.
So, the idea that economic deprivation caused by poverty might be especially detrimental for early in life has been a focus of my research. And it’s also a very important policy issue because over the last 20 years since welfare reform, we’ve oriented our safety net more toward working parents — Earned Income Tax Credit, child tax credit, those are much larger now than they used to be, and they’re going to working families, generally families with somewhat older kids, and families who are further along in the life cycle then the families just starting out with newborns.
So there’s a substantial amount of poverty among low-income kids and especially young kids, and the question of whether income is an active ingredient in producing all the correlations that we see between poverty and child development.
One of the more noteworthy studies coming out of neuroscience recently shows that white matter in brains between kids who are in low-income families and higher income families is very similar to about six months of age. But by 36 months of age, there are these growing differentials, and we don’t really know whether it’s income poverty or whether it’s other conditions associated with poverty — things like single-parent family structure, low levels of parent education, neighborhood disadvantage.
What we’ve done with the project that we’re just starting is to try to isolate the impact of income itself on young childrens’ — infant and toddler — cognitive development and socioemotional development. Hence our experiment that’s just starting out now.
Jim: Now, I think when a lot of people think about the academic world, there is often an assumption that people are doing analysis but aren’t actually getting into really changing the way that our systems and policies operate. But this experiment you just referenced, Baby’s First Years, this is actually an instance where you are going to be providing unconditional cash payments to a number of low-income mothers and seeing what happens. So, can you just tell us more — what are the details of this experiment? What are you hoping to learn from it? What will that actually look like?
Greg: Sure. I mean, we think about clinical trials all the time in medicine, and we don’t trust drugs unless they’ve passed a muster with clinical trials. And with clinical trials, you have random assignment between some sort of treatment condition and some sort of control condition.
So we’re just taking that technology and applying it to income supplements. Specifically, we’re recruiting a thousand mothers in four different sites around the country. All the mothers have incomes below the poverty line. All have just given birth — we’re recruiting them in birth hospital shortly after they’ve given birth. Their participation is completely voluntary, but we ask if they’re interested in enrolling in a chance for a cash gift. And we’ve got two levels of that cash gift: either $333 a month for the first 40 months of the child’s life, or $20 a month for those 40 months. So 333 versus 20, it adds up to about four thousand dollars a year over these 40 months.
But the payment that’s monthly is trying to be aimed at the kind of instability, economic instability, that a lot of low-income families have. So the question is: to what extent are the babies going to be developing along more positive trajectories if they’re in this group of families where the mother is getting $4,000 a year versus $240 a year? And we’re interested not only in the comparison of how the child does. We’ve got, at age three, we’re planning on bringing the kids into neuroscience labs and doing all sorts of testing on their cognitive capacities and associate emotional behaviors, executive function, and things like that.
So we’re interested in the child, of course, but we’re also interested in the families. So what if the child does better with this higher income payment, what is it about the family that’s changing in a way that the produces that improvement? Is it the kinds of enrichment goods and services that parents buy, center-based childcare, for example? Is it the fact that this steady stream of income widens the bandwidth, cognitive bandwidth, of mothers and enables them to stay on top of things better? Can they avoid addictions? Can they avoid food insufficiency? The various things that can happen and often happen to low-income families that some sort of income floor might smooth out.
So the idea is to run this experiment, recruit the mothers over the course of 12 months and then visit them when their children are age 1, 2, and 3 and track what happens in these two groups, both in terms of how the kids are turning out as well as what sort of differences are showing up in family process.
Jim: Now, we often talk about motivations for programs like universal basic income and unconditional cash generally on the podcast, and a number of our past discussions have looked at it from different perspectives as to why that could be a particularly valuable approach to take. I’m curious for you, what were the main motivations to look at unconditional cash here as opposed to more traditional in-kind benefits like food or baby supplies?
Greg: Yeah. So we’ve got a safety net that consists of SNAP, which is the food stamp program, housing subsidies, various programs that subsidize different kinds of goods and services for parents.
But if you think about the way social benefits broadly conceived are structured, we already have a child allowance in the United States. We have in our income tax system, we’ve got an exemption for every child who’s a dependent. We have a child tax credit. We’ve got a additional child tax credit. We spend 100 billion dollars a year on what amounts to an annual child allowance, but it’s only reaching middle class families and richer families. Families that aren’t earning enough to be part of the income tax system don’t benefit from that.
So the idea really is to think of taking those benefits that are now concentrated not at the low end of the income distribution and thinking about a more general universal child allowance that would be received, you could imagine different forms that, you could imagine simply universal child allowance for families at all income levels are getting this in recognition of the fact that they’ve got extra expenses because they’ve got kids in their house.
So, you know, the more general universal basic income movement is really conceived with adults in mind, and we’re focusing on some kind of universal income that’s focused on kids. Although our test really isn’t of a universal kind of child allowance, but it’s more what might happen if you had that for low income families, for families with incomes below the poverty line.
Jim: So, can you tell us a bit more about what the research landscape in this area looks like to date? What previous findings were you drawing on or looking to when thinking about how to design and execute this study?
Greg: Sure. There have been hundreds and hundreds of studies linking poverty to child development in various ways. A lot of it is just correlational, where you observe whether the kids are poor or not as they are growing up and then you see whether they complete more education or they earn more or they’re healthier. And of course you get those correlations. You get particularly strong correlations with income in early childhood, which is kind of interesting.
There are what social scientists call quasi-experimental studies. There’s one that Hilary Hoynes did of the rollout of the food stamp program back in the 60s and 70s, and she tried to see to what extent for low socioeconomic status families kids who were conceived and born into counties that were already receiving food stamps were doing better in adulthood than kids who were conceived or born into counties where food stamps weren’t available — it was a county-by-county basis — and finds this remarkable relationship where adult health, cardiovascular health is substantially better for kids who are born in the counties where there’s already food stamps compared with kids not very far away across the county line where food stamps weren’t available.
So that’s very intriguing. And there are some genuine experiments in the 70s and 80s. There were called negative income tax experiments, where they actually randomly assign people to get different amounts of income. There were welfare reform experiments in the 90s.
But none of these studies really concentrated on very young kids. So if you’re particularly concerned with the effect of economic disadvantage on infants and toddlers — the food stamp study I mentioned is very much focused on early life, but all of the other kinds of experimental studies really are focused on older kids, so they often found differences, but you really can’t generalize down to very early life on the basis of studies that are conducted on kids who are already in elementary school or high school.
Jim: You mentioned a number of different areas that you’re planning to look at as far as what the impact of this treatment might be. Can you say a bit more about what specific data that you’ll be collecting in order to be able to assess that?
Greg: Sure. You’re always trying to be copycats when it comes to growing measures for our study. It’s very nice to be able to use measures that were used in national studies so we can compare our study to results from larger and more representative samples.
But there are standard cognitive tests, IQ type tests that we’ll be using for the kids. There are standard assessments of executive function, which is kind of working memory and impulse control.
At age 36 months, you can’t put kids into fMRI scanners because they don’t nap reliably, and they get frightened. But you can put caps on their head to measure electrical activity, and that’s what we plan to do. EEG and ERP are the initials for the kinds of electrical signal data that we’ll be collecting.
So the idea is, around 36 months, kids are starting to develop an ability to regulate themselves. So when there’s an impulse — the three-year-old is hit by a playmate in preschool — is that child going to hit back? Now the instinct in the amygdala is to strike back right away, but then the prefrontal cortex might say, well, maybe let’s wait on that. But that’s going to require a connection between the amygdala and the prefrontal cortex and that wiring starts to take place around this time. So the question is whether we’ll observe stronger connections in the kids who are in the higher income families relative to the kids who weren’t.
So that’s on the child side. And on the family side, there are just many, many different kinds of measures we’re going to be drawing. We want to know about expenditures, to what extent are family spending their money differently between the two different groups on things like childcare? Are they moving to a better neighborhood? Are mothers working less? Are they using the opportunity for this higher income to take more months out of the labor force before re-entering in order to be with their children for the first three or four months of their kids lives?
We’re also interested in stress. We’re measuring that both with questionnaires as well as biologically with the stress hormone cortisol, which you can get in saliva as well as hair.
We want to know about the sensitivity of parenting. And for that, there’s kind of a standard play task that you can give to mothers with their kids. This is going to be at 24 months, when the kids are 24 months of age. You videotape it, and then you code it up for language. You code it up for the sensitivity of parent interactions.
So, we have a lot of, we have ambitious plans to gather a lot of information, both about the kids as well as the family.
Jim: So, I think most people think of providing unconditional cash as a super simple process: you literally are just giving people money. But when you actually get down to the details, there are some obstacles and complications that can arise. Can you tell us about what challenges you faced in getting this experiment going and how you dealt with them?
Greg: Yeah. That’s… we’ve taken about six years almost to get this project off the ground. And some of it was fundraising, but it turns out, as you say, to be rather difficult to give people mone. And one reason is because of the safety net that’s in place. So if you give families an extra $100, and they report that to the food stamp, the SNAP program officials, food stamps are reduced by about $33 as result of the additional hundred dollars of income. And for housing subsidies, that’s the same kind of thing. You get this chunk of the benefits reduced as you get additional income.
So in order to make sure that the net amount of income increase for the families was the full $333, we had to work with the states with all of our sites as well as a lot of localities to get either legislation or administrative rules changed so that income from our payments did not count as countable income for the determination of any of these benefits, So these are cash gifts, and we’ve worked out details, sometimes painfully, to make sure that caseworkers know that it’s not proper to count our income as countable income for the termination of benefits.
So we enrolled our first mom yesterday, which is very exciting, and in the next couple of months, we’re going to be doing a lot of work on the ground to make sure that all of these exemptions that are being secured are working for the moms, so they’re getting the full amount of money that we’re providing to them on their debit cards.
Jim: Well, that’s great to hear that things are actually really off the ground. Those are all the questions that I had — is there anything else that you’d like to add here?
Greg: I might say, you know, the connection between our findings and public policy are tenuous. In public policy debates these days, one side has one set of evidence, the other side has another set of evidence. At least in the welfare reform debate in the 90s, evidence from social experiments, where there was the kind of random assignment that we’ve got, was widely respected by a substantial swath of legislators on both sides of the aisle.
Whether that’s still the case, we don’t know. But I think one needs a random assignment experiment in order to have a possibility for influencing policy. And once we get our results in hand, we’re very much committed to try to inject these findings into debates that are taking place every year in federal government as well as state legislators all around the country.
Owen: That was Jim Pugh and Greg Duncan on the Basic Income Podcast.
Jim: So, it’s great to see another experiment on unconditional cash being moved forward in the US. I think that the more pilots, the more experiments we can have, the more data we collect, and the more stories we can tell, the easier it’s going to be to make the case for more policy. That as this becomes more of just a thing people do, it’s going to, it keeps moving the ball forward.
Owen: Yeah, and I think this delves into territory that we touch on a little bit just through our work in the basic income space, but doesn’t get a ton of mainstream media exposure, that how you grow up, the conditions in which you grow up, and the effects of poverty can affect your actual brain, and you can see those effects very early on within the first few years.
Jim: Yeah, and I think the fact that there is such rapid development then means that the effects of just a couple years of additional support could really be massive here. And so often we talk about, well, if you’re an adult, if you get support for two or four years, how much difference does that make in the longer term? That even if it’s helpful, that if you look at where you are 10, 20 years down the road, I think there’s still some questions as to whether that impact is going to be terribly large.
But if we’re talking about children and we are thinking about the development aspect, then two years of a different environment — yeah, that can be a game-changer.
Owen: Yeah, and it completely gets around the whole idea of, well, did this person make some mistakes? Were they responsible with their money? All the things that you hear that are attempting to kind of skirt around the impacts of poverty and the effects of that cash could have. No one’s going to say that about a one-year-old, and we’re talking about one-year-olds here.
Jim: Hopefully not. Hopefully we’re not in that place.
I also thought — and we’ve talked about this before — but another great example of how complicated it can be to actually administer paying people money. And that to actually be able to move ahead with this experiment, they had to get, they have to work with state legislatures and get approvals so that they didn’t kick people off their are other benefits plans.
And so I think that’s just another good example of how, as we’re thinking about moving forward here, we need to be ready for it to be more complicated than we first assume it might be.
Owen: Sure, and also, huge credit to them. They got legislation passed in multiple states to make this happen. And obviously, that’s no small feat. Even if it’s good legislation, it’s hard to get legislators’ attention to get something through. And so, yeah, big credit to them, and also, yeah, a sign that this is going to be a long complicated fight.
Jim: Yeah, certainly. I also, and we’ll see what happens, but going back to your point about the different perceptions there are around children, I think that we’ve seen in the past that it tends to be much more politically viable to push for more supportive policy towards children.
And so, if there are some compelling findings here after this experiment is over in a few years, that gives a strong reason for enacting this sort of policy widely. Maybe that sets us up to actually move pretty quickly on some more ambitious legislation on this front.
Owen: Yeah, some people propose a child allowance as the first step toward a basic income. And I go back and forth on that because I think there’s so many reasons to give an adult a basic income. But, you know, I think that it might be the most politically viable path.
Jim: Right. There is the question of, how well does that set up for everyone else getting in money? But it is, maybe, a more easy policy to start giving money out to some folks at least.
Owen: Yeah, and would be hugely impactful.
Owen: Well, that’ll do it for this episode of the Basic Income Podcast. Thank you so much for listening. Thank you to our producer, Erick Davidson. If you like what you hear, please rate us and review us on Apple Podcast or the service of your choice. And do tell your friends — we’re always looking to bring more people into the conversation.
See you next week.
The basic income conversation is alive and well in India, particularly in the wake of an analysis conducted by the The Indian Ministry of Finance’s 2016–17 Economic Survey. Saksham Khosla, a Research Analyst at Carnegie India in New Delhi, discusses the Ministry of Finance’s proposal, and the various issues to be tackled in considering a basic income program for India. Khosla describes the unique challenges of creating a social safety net for a country of over 1.3 billion people.
Owen: Hello, and welcome to the Basic Income Podcast. I’m Owen Poindexter.
Jim: And I’m Jim Pugh. We’ve talked briefly in the past about some of the past research around cash transfers, and there’s been a fair amount of studies on that and, in particular, some basic income pilots that have taken place in India in the past. And there’s recently actually been quite a growing debate in the country on the policy, but we really haven’t had a chance to delve in on that topic until now
Owen: So here to help us do that is someone who spent a lot of time with these issues in India. So joining us is Saksham Khosla. He’s a Research Analyst at Carnegie India. Welcome to the podcast.
Saksham: Thanks so much, guys. Thanks for having me.
Owen: So, to start with, can you just tell us generally about your work on universal basic income?
Saksham: Yeah, absolutely. So my research on UBI has really started in the aftermath of the Indian Ministry of Finance’s proposal for an Indian universal basic income that came out in 2016. That particular report seemed to have set a firestorm of debate in India about how does some radical transformation of the welfare net can be implemented in India.
So after that report, I really became interested in figuring out how apt really is such an intervention for the Indian context and what might one think about when something like this have to be implemented at the scale and size and scope that is India. That really was the rationale for getting into a, discussing a UBI for me.
Jim: Now, you’ve written that there is an active debate around basic income in India. Can you tell us a bit about, what is the driving interest there behind the idea? Is it, in the US, oftentimes automation is brought up as a reason for people to become interested, and there are people who explore it for other reasons here as well, looking at the anti-poverty and equity value that the policy might bring. But I’m curious if you can give us some insights as to what’s actually causing people to pursue this policy there.
Saksham: Absolutely. Like in the US, the universal basic income is the not really a new idea for India. In the late 60s, there were debates happening within the Indian cabinet about whether a minimum income standard would be a useful policy intervention.
That debate seems to have subsided since then, but it seems to have picked back up starting around 2011 and 2012 when a couple of Indian Economist started thinking about whether there is an argument to be made for administrative efficiency. And that really is the big driving rationale for an Indian UBI. Can it outperformed our existing social safety net, which is one that is incredibly expensive? It’s sort of a patchwork of programs that takes place across the country in for a variety of different populations. And the thinking is, well, can one cash transfer, something that suffices for a household and is enough to cover their basic need and that’s delivered directly into people’s bank account, can that really outperform some of the more complicated welfare arrangements that we have in this country?
And since then, that debate is really been picked up by lots of economists, scholars, researchers, activists, and that has finally culminated in the economic service report that came out a few years ago.
Owen: So we’ve spoken in recent episodes about the importance of understanding the context of a country’s social benefit system before we, you know, throw in a UBI. So if you could just help us understand India’s current anti-poverty programs and other social programs, that would be really helpful.
Saksham: Yeah. So the poverty alleviation strategy has really comprised three basic prongs. First off, obviously, economic growth. Second is public services like healthcare, education, sanitation and so forth. And the third, in which particularly the Indian state has invested heavily since the 2000s is social protection. And this involves transfers of varying kinds, subsidies. And these can broadly be broken down into two basic tents.
The first is obviously services that are rendered for individuals who are in the formula sector. So whether you’re a government employee, whether you’re employed by an organization, pays taxes, and has its employees on a formal payroll. But these, the formal sector really comprises a minority of India’s labor force. A little less than 10 percent of the entire working population falls within the formal sector. India welfare architecture really kicks in and comes to life for the remaining 90 percent of the workforce, those who are in informal organizations. They’re off the books, they’re self employed, they’re primarily involved in agriculture.
And here, the Indian state has a variety of programs. The first broadly are programs that are more or less transfers. These involve India’s flagship fuel, fertilizer, and food subsidies. There are India’s public works program called the Mahatma Gandhi National Rural Employment Guarantee Program, which is the world’s largest public works program. And then you have a series of insurance programs as well as the national social assistance program, which is basically a combination of pensions, which is given to the elderly, those who are disabled, widows, and so on and so forth.
So that is the broad generalization about India’s social safety net. Some of these, mostly, they are in-kind, but there are a few cash transfers in there as well.
Jim: Now, India currently has over 1.3 billion people living in the country. Can you talk about how does the massive size of the population affect how to country administers social benefit programs?
Saksham: That’s a really good question. I think the way the country has figured out how to administer the variety of programs is to essentially leave the central government in charge of the biggest and most expensive of these programs and then work alongside state government as well as local governments to decentralized some of those work and have them do a little bit of the heavy lifting. So while the funds may actually be coming from the central government, a lot of the day to day implementation is actually done by state governments with district administrations.
Now, of course, a lot of individuals fall through these cracks, just given the size and complexity of India, but that is the general thinking behind well, how does one go about addressing such a population?
Owen: So now getting into your analysis of the UBI proposal by the Indian Ministry of Finance’s economic survey: could you describe the proposal and also share your views on its, what you see as its shortcomings?
Saksham: The proposal, the big headline findings from the proposal are basically along the following lines. I definitely do recommend checking out the entire chapter in its entirety. But the big takeaways from the Ministry of Finance’s chapter was that a transfer of Rupees 7,000, which comes out to about 110 dollars annually, would bring down poverty from the existing poverty rate, about 22%, to a poverty rate of about 0.5%, if that transfer was given to 75 percent of India’s population.
So it’s important to know that this is not a fully universal transfer. The economic comes out and says that completely ensuring coverage of the entire population would be something that would be too fiscally costly, and possibly even politically costly as well. So it advocates for a 75% coverage rate, and it suggests various ways of excluding the remaining 25%, whether by targeting certain populations, rolling it out sequentially, possibly even targeting different geographies of the country and then taking it up to a larger scale.
The cost that the economic survey puts for such a transfer to a population of that size is about 5% of GDP. This is a fairly high, fairly costly estimate, and the survey comes out and says that this isn’t something that can be an add-on to existing programs. So all the programs that I talked about earlier like the public works program, the public distribution system, which is to ensure food security in the country, and a variety of other large welfare schemes would essentially have to be rolled back or dismantled to make place for a UBI, for a quasi-UBI as the survey calls it, of this magnitude.
So after looking at how the survey goes about putting together this estimate, and the implementation of a UBI, I had the following thought to evaluate this proposal. First of all, it is not really a universal basic income, obviously it’s for 75% of India, not the full population. So there is going to be targeting still retained as a big part of the program.
Now the service says that it wants to exclude the rich rather than target out, target the poor. But that still seems to me at least leaving the door open to a series of inefficient means-testing mechanism, or even other targeting techniques that may not work as easily in practice as they would in theory.
Looking into the various ways of calculating the transfer, the annual transfer of about $100 per year, it’s a fairly low payout because it’s based on a lower poverty line than alternative poverty lines that are available in India. And it’s not a true poverty line transfer as well. It’s essentially a cash transfer that is supposed to push people over the party line.
If you were to actually calculates the cost of giving folks in India a poverty line transfer, that would come to about 10 to 12 percent of GDP, rather than the 5% the survey puts forth. And that’s actually more than the entire central government’s revenue in the path. So we can see already that the the size and population of India is a big constraint on pulling off an ineffective UBI.
So the final part of the puzzle is, well, how do you actually send folks the transfer? The survey puts a lot of stock in India’s national biometric identification system, called Aadhaar. And the government’s push for universal financial inclusion. The survey actually comes and says that these two pieces are essential to have in place before one can think about having a universal transfer deposited directly into people’s bank account.
I completely agree with that estimate. I think it’s fairly early in our financial inclusion system to think about transmitting such a transfer effectively. There have been a series of evaluations by scholars, activists, and journalist of cash transfer experiment that are currently being undertaken in relatively urban parts of India where the food security program, the food that one would ordinary get down to the program, people are being given cash instead of that. A series of evaluations have found that for a variety of reasons, whether last mile delivery, the actual amount of the cash, the cost that people have to bear in receiving the transfer then going and spending it in the open market, actually have created significant concern for these populations. So in parts of the country where things like the PDF and other welfare schemes are function fairly effectively, the preference for cash transfers actually fairly low.
And we can see that the series of implementation problems the current government is facing with implementing cash transfer as indicative of just how far we have left to go before we can think about universal or even quasi- universal cash transfer across the country. So a UBI, for all it’s worth in theory, actually radically changes when one thinks about translating it into policy and action.
Jim: You mentioned challenges with “last mile” on this new cash transfer approach. Can you elaborate what those issues are?
Saksham: Yeah, absolutely. So the pilot evaluations of what are called “direct benefit transfers” have essentially found that, and these have been a series of evaluations that have been going on by organizations like JFL in coordination with the Food Ministry. And they’ve essentially found that the size of the subsidy, in particular, has not been enough for individuals getting the transfer to compensate for their typical consumption expenditure.
In addition, the combination of cash transfer with the biometric identification program has complicated things significantly. What that means is that when an individual goes to get this cash transfer, they must authenticate their fingerprints to receive that transfer, and their fingerprints are essentially recorded within the nation’s biometric identification program.
And across rural India, authentication failure are an incredibly big reason why people have been unable to receive their payments. That has resulted in massive exclusion errors where people who would have otherwise been able to receive their food rations, simply by demonstrating their ID card to the person actually giving out this grain, have been systematically denied their cash transfer. So authentication failures and exclusion errors that have resulted as a part of the Aadhaar program, just the biometric program, have been a significant obstacle in receiving this transfer.
Over and above that, actually going and spending this money in the open market has been something that incurs high private cost because one has to take out the time to actually go and receive the transfer, go and spend it out on the open market, because of all these reasons, there’s a lot of progress that needs to be made before large-scale Aadhaar-linked cash transfers can be actually trusted to fully reached recipients.
Owen: That’s very interesting. So universal basic income has a lot of principles embedded in it, such as universality and unconditionally. Even if a full UBI may or may not be right for India, what principles from the overall concept do you think would be useful in implementing and changing India’s social benefit programs?
Saksham: So I think something that has benefited several state governments, and even the central government in their implementation of existing welfare programs, and I’m thinking particularly of the public distribution system and security, has been to universalized coverage and reduce the number of eligibility criteria or bureaucratic hoops a beneficiary has to jump through to receive that transfer.
So several Southern and Central, even Eastern Indian states have found that when they implemented reforms that make it eash for a vast proportion of the beneficiary population to receive the transfer with relatively little bureaucratic middlemen, that actually has helped reduce leakage, reduce corruption, reduce the chance of transfers of being diverted from beneficiaries.
So a big reason why the administrative efficiency argument is made in favor of a UBI, that argument loses a certain part of its salience when one considers the progress that India’s existing welfare schemes have made to reform themselves just by implementing the principles of universality, and to a certain extent, unconditional as well. One thing that I actually think, and this is something several scholars in India has put forth, could be a stepping stone potentially to a UBI, is to universalize existing social pensions among folks that are elderly, the widows, and people who are disabled, because these are vulnerable populations. They’re easily identifiable, and a series of evaluations and studies over the past decade have found that this is a program that works particularly well relative to other schemes.
So if one were to universalize payments, and social pensions in particular, I think that would be a very useful way to combine the central tenet of UBI, which involves cash given to a universal population with as little bureaucratic intervention as possible.
Jim: So delving more into the politics around this: can you give us a sense for what is the current conversation around basic income and similar policies in India right now? Where does there seem to be momentum for actually pushing forward real change?
Saksham: I think the conversation for UBI, at least politically, seems to have hit a pretty significant roadblock immediately after the proposal was submitted by the Indian Chief Economic Advisor’s office. The chief, the country’s Finance Minister pretty much came out and said that the country’s finances cannot handle a UBI at this point in time and that it would be easy to implement, but very hard to roll back. So I think there is a fair amount of political doubt, I think, about the feasibility and the need for such a program at this point in time.
But I think that there is certain cause for optimism, if not from the central government, but from the state government. So several Indian states are actually contemplating whether it would be easier and more feasible to convert several of that existing benefits Into cash transfers, combine that cash transfer, and transmit that to their beneficiiaries.
Now, obviously, there are a couple of dangers here. One has to be careful that this isn’t a program that Happens only in India’s most effective states administratively, and states that, rather than states that actually need this sort of intervention. And that under the guise of a UBI, this isn’t an excuse to sort of step back from the state’s obligations to its citizens and convert programs that would be relatively high functioning into relatively meager cash transfers. I think that’s a big risk.
So I think the conversation right now, at least politically, on a UBI seems to be at a bit of a standstill. But I don’t think that that should be cause for pessimism. Several folks have recommended that coalition of workers unions, whether they are informal workers or workers in formal sector, could come together to agitate for a UBI. In fact, several of the UBI experiments in India have been conducted with the help of the Self Employed Women’s Association, which is a group of women running small businesses for whom this policy seems to have great potential. So I think that is where the political discussion is at.
It’s also hindered because we really don’t know what the final form of a UBI will be in India. The economic survey proposal is just that, it’s one proposal. But we don’t know whether a central state government would go about actually implementing it. Would it involve a higher amount of taxes? Would it involve actually dismantling existing schemes, in which a brave government would have to contend with the beneficiaries of that scheme, and therefore the political ire, as it were. So I think that’s where political discussion is at.
Owen: So, given the uncertainty both around the politics and also about what is the right way forward, what do you see as the next steps for basic income in India?
Saksham: Well, I think for both a UBI, folks that support UBI, and those that criticize the the applicability of such a program, the only way this discussion can move productively forward is, I think, through a state-administered basic income experiment. And I want to emphasize the part that this should be, something should be administered by a state government or a collection of state government, potentially even by the central government. Because rather than the discussion that’s happening in the US or in certain parts of Europe, the key constraint to implementing a basic income in India is state capacity, and whether the Indian state implements it in such a fashion that is more effective or can outperform existing schemes. The relative benefit or merits of the idea quickly lose any of their relevance if what we get in its place is a program that leaks, that has a high chance of encouraging corruption, and that may even come at the cost of schemes that do actually deliver their benefit to these citizens.
So I think a basic income trial, ideally something that is longer than five years to resist electoral pressure and to give us long-term cash transfer effect, is incredibly important for this debate. And if we can get this done with the participation of an external agency that has high amounts of experience evaluating large randomized control trials or other forms of welfare evaluations, that would be an ideal way to figure out, well, is this really something that fits neatly within the welfare contact and if it’s something that is worth investing resources, time, and even political will behind.
Jim: That was Saksham Khosla, a Research Analyst with Carnegie India.
Owen: So, I found it very interesting when he described the problems of implementation of cash transfers. It felt like the reverse, at least in the US and a lot of other countries, where usually if you’re delivering stuff or some kind of non-cash benefits, that’s much harder than delivering cash. There’s a lot of transfer issues, whereas cash is just instant and easy. Whereas, you know, as he described, that’s not really the case in India.
Jim: Yeah. I think this was a great example of understanding the key differences that will ultimately lead to different right solutions in different countries. And that recognizing that it seems like there, I mean he talked about leaks and corruption in the process. And so they have systems they’ve developed over time that are, at least it seems currently, somewhat resistant to that, and if you’re talking about something new, that “last mile” piece may actually be a huge challenge. And so whether you use cash instead of specific in-kind goods, any sort of new approach, and also the amount of security you need to include with it in order to try to prevent that, those all create additional barriers that you don’t necessarily think about at first blush.
Owen: Yeah, and like you said, I think it shows the importance of experiments and trials just because there’s always going to be something that you’re not thinking of when you actually lay it out. I feel like a lot of us advocates can kind of get frustrated because we feel like we know this works, that we should just do it, but you learn so much through all the trials that we’ve done and especially in a context that at least we’re not particularly familiar with.
Jim: And we talked about this in the episode earlier this year with Elizabeth Rhodes, but for the Y Combinator experiment, the first thing they did wasn’t to run the experiment. The first thing was to do a very small pilot just to understand logistics.
So even here in the US, people recognize that once you actually, once the rubber hits the road, and you’re actually talking about real programs, it’s so important that you really dig in and understand, what are the logistical challenges? How, are there ways that this may have unintended consequences or break down at points that we might not think about in a top-level economic analysis?
Owen: Yeah, and speaking of economic analyses, I always find it interesting what conditions people choose to set when they’re creating these analyses. You know, he described one where it’s 75% of the population, which it’s kind of daunting to think about how that remaining 25% is like the population of the United States. But, you know, that’s one way to do it.
We spoke to the team in Washington DC who looked at a basic income at the poverty level and 4 and 1/2 times the poverty level. And I just find it interesting the sorts of choices that people make when they’re modeling this out, and I feel like, you know, that’s something where it’s a lot cheaper to do an economic analysis, but we could still use a lot more of those to just get a feel for what different programs might look like.
Jim: Getting more movement on all fronts. The more, the better we understand this, the more informed and deep debates we can have, the better for moving things forward.
Owen: Yeah, absolutely. Thank you for listening to the Basic Income Podcast. Thank you to our producer Erick Davidson. Please subscribe on the podcast service of your choice and leave us a rating or review. And please tell your friends to bring more people into this conversation. See you next week.