Money for Nothing: The Advantages of Universal Basic Income

Jul 7, 2019Aug 23, 2019 / Small Change / 1 Comment

The idea that we could pay everyone enough money to live on with no strings attached has been around for hundreds of years. With income inequality and job automation on the rise in recent years, however, the idea has started to make more and more sense.

UBI and Income Inequality

Universal Basic Income (UBI) means that each person is paid (by the government) enough money that they can afford food, shelter and even a carefully budgeted social life without the need for work. The extremely poor would be paid exactly the same weekly wage as the extremely rich. Where would this money come from? A tax on the obscenely rich of course. A 40% tax on Jeff Bezos’ wealth would yield around 61 billion USD, leaving him with a measly $91 billion for himself. The $61 billion that comes from taxing one man could be used to pay someone else $500 dollars a week for 2 million, 346 thousand, 153 years. That’s nearly 12 times longer than our species (homo sapiens) have existed.

Bezos himself would be left with more money than it is possible to spend in a lifetime, even living the most extravagant of lives. What’s more, he would continue to generate huge quantities of wealth through both the profits of Amazon and the monumental interest which accrues when one has $91 billion in one’s pocket. This is not necessarily how UBI would work in practice. Rather than a wealth tax, the money could instead come from taxing the income of the extremely rich. This avoids the problem of trying to tax assets like property and warehouse robots, but the drawback is that it is easier for billionaires to hide their income than it is for them to hide their robots.

Incidentally, working 24/7 with no breaks at the US minimum wage of $7.25 per hour, it would take 2 million, 393 thousand, 324 years to make as much money as Jeff Bezos currently owns. That is also roughly 12 times as long as sapiens have been around (aren’t numbers fun?). The question these figures pose for me is this: What could Jeff Bezos possibly have done in his life that is of equal value to 2 and a half million years of minimum wage work?

The way the system is currently set up necessitates that the rich get richer and the poor stay poor. People working on minimum wage make just enough to get by, leaving them with basically no possibility of saving or investing in education. The super-rich, on the other hand, are actually paid just for being rich (in the form of interest). People who are struggling to make ends meet may be forced to borrow money from the very rich. These loans accrue interest, meaning that the net effect is that money is taken away from the economically disadvantaged people who need the loan and funneled upwards into the bank accounts of the people who could afford to give the loan. These factors, along with automation of jobs and a few others, are why income inequality has been rising and rising and showing no sign of slowing down. Taxing the rich and using the money for UBI would go a long way towards closing that gap.

Many researchers have drawn a negative correlation between income inequality and self-reported happiness. This makes sense in terms of both the numbers and the philosophy. Of course people in more equal societies are happier. Every country has a finite amount of resources, and how fairly those resources are distributed determines how many people are struggling to put food on the table and how many people can comfortably provide for themselves and those who depend on them. Given the link between happiness and inequality, it follows that a system such as UBI which dramatically decreases inequality would also lead to a dramatic increase in happiness.

UBI and Employment

These days, when someone is called a ‘Luddite’, it is typically used to mean that they are opposed to the progress of technology. An example would be someone who refuses to buy a smartphone. However, the word originally referred to a revolutionary group who were active more than 200 years ago. The Luddites were weavers who were famous for smashing spinning jennies, machines that threatened to put them out of work, but they were not necessarily opposed to technology as many people believe. Instead, they were opposed to the obscenely rich upper class who owned the spinning jennies, from which the workers reaped no benefit. Spinning Jennies were not new technology, in fact they were invented 50 years before the first Luddite ever smashed one.

The problem was that when something was woven by hand, the weaver could receive the majority of the profits, whereas if it was woven by a spinning jenny, the majority of the profits would go to whichever wealthy man owned the machine. The Luddites were early trade union activists who protested unfair wages by destroying their employer’s revenue-generating property. This problem has only gotten worse since the protests began in 1811. Many people, like fast food workers or cashiers, make a living by operating machines which belong to extremely rich CEOs who have very little indeed to do with the actual production process. Amazon currently have 45,000 robots operating in its warehouses, generating revenue but paying no tax. A barely related but nonetheless interesting side note is that Amazon’s warehouse robots have accidentally opened multiple cannisters of bear repellent in the last few years, leading to the hospitalisation of dozens of employees.

About 50% of workers are predicted to lose their jobs to machines by 2050. The number of jobs that are beyond the reach of automation has been shrinking ever since the Luddites banjaxed their first jenny, and the rate at which they are disappearing has become more and more rapid with the passing of time. Before anyone thought to use a dummy, the job of scarecrow was carried out by children, who were paid one penny and a swede for their troubles. For me, it makes perfect sense that jobs like this were lost to time. That is why we build technology; to reduce the amount of work we need to do ourselves. Often the jobs that are taken by machines are ones that we only do because we need the money, not because we find them fulfilling or meaningful. With UBI, we could leave those jobs to technology and focus instead on projects which make the world a better place.

The main issue here, for me, is not that jobs are lost to technology. New jobs are constantly being created to meet new demands. While human scarecrows have gone the way of the dodo, uber drivers and dogwalkers have popped up in their stead. That’s evolution baby. The priority should not be to desperately cling to jobs that we no longer need or want (like coal mining or weapons manufacturing) but rather to provide adequate training to the people doing these jobs so that they may transition to ones which are more useful to society (like building renewable energy infrastructure or vertical farming).

People do not do jobs which harm society because they want to. They do them because it is necessary to put food on the table. By providing food and shelter to everyone, we mitigate the external pressure to work jobs which harm society and encourage people to focus their attention instead on what gives their lives meaning or makes them happy. What they choose to do will be more likely to be in the best interest of society than what they are currently forced to do to survive in a broken system.

Another way that UBI could benefit society is by massively streamlining the welfare process. Right now, huge numbers of people are employed to sign people up to welfare, make sure that people are looking for work and carry out the administration and bureaucracy involved in a system which requires people to prove beyond a reasonable doubt that they are starving before it will give them something to eat. These administration jobs could largely be done away with under UBI, since welfare would be replaced by the very simple process of giving everyone exactly the same amount of money regardless of their situation. The money we pay to welfare officers and administrators could be used to help fund UBI, and the people who are doing these jobs would be freed up to pursue more fulfilling goals. Hell, one of them may be the next Jimi Hendrix but they never had the time or resources to pick up a guitar before.

What about the claim that if everyone is paid to do nothing, then no one will do anything? This, in my view, is simply false. People have an innate drive to make something of themselves. I doubt you would last more than a week doing absolutely nothing before you decided to get up out of bed and make your name mean something. In addition, UBI does not mean that there is no reason to get a paying job. Your weekly wage as an unemployed person would be enough to live on, yes, but it would not be enough for a particularly comfortable life. Most people would still work a few days a week to make money for holidays, luxury items and projects which enrich their lives. This idea is supported by preliminary evidence from the most complete pilot study ever carried out in relation to UBI.

From 2017-2018, 2,000 people were randomly selected in Finland to receive €560 per month with no strings attached. Researchers then compared those who participated in the study to a control group of 173,000 people with respect to several factors including employment rates and life satisfaction. For all of 2017, the test group earned, on average, just €21 less than the control group from employment. This extremely small difference tentatively suggests that UBI will not lead to a significant reduction in employment, if any. The difference in trust and life satisfaction between the two groups, however, was far more significant. Basic income recipients reported much higher levels of trust in other people, the legal system and politicians. They also reported much higher confidence in their future, financial situation and ability to influence societal matters. In addition, 54.8% of basic income recipients self-assessed their health as being ‘good’ or ‘very good’, compared to just 46.2% of the control group. The study only ended in December of 2018, so the full report has not yet been released, but the preliminary evidence suggests that under a UBI system, employment rates would stay about the same, whereas happiness, trust and health would benefit hugely. The full report is scheduled for release at the end of 2019.

UBI and Society

To say that UBI is unrealistic because the rich will not allow it to happen is to succumb to a form of brainwashing. There, I said it. There are more of us than there are of them, and yet somehow they have convinced us that they will always have all the money and we will always have none. The most important tool in their arsenal is your belief that they are too powerful to oppose. By arguing that they will not allow it to happen and therefore we should not even try, you are playing right into their hands. If you think that UBI would be good for society (as I do) then you should fight to make it happen. I am not saying that we will not come up against any resistance from the financial elite. We very much will. What I am saying is that one of the ways in which they have resisted change already is by convincing you that they are so firmly in control that nothing can be done.

UBI would give us the freedom to do what we want to do with our lives. It would provide the foundation for an equal society, in which those who were born with nothing can make something of themselves and those who were born with everything get a smaller slice of the global pie. The Luddites thought that it was unfair that people who had inherited enough money to buy spinning jennies were taking all the profits while the people working their fingers to the bone operating those machines were making a pittance. I wholeheartedly agree. The private ownership of revenue-generating technology like tills, deep-fat-fryers and warehouse robots has been a significant factor in the long-term trend toward a top-heavy and unjust society in which some people have mansions to themselves while others share tiny flats or worse, sleep on cold and unforgiving streets.

Automation, inheritance, interest, loans, tax loopholes and unfair wages have created a society in which some people have everything and everyone else has nothing. There are things we can do to alleviate this problem like raising the minimum wage or corporate tax, but none do more to solve the problem than UBI. The disadvantaged majority have always fought for equality and the advantaged minority have always resisted to maintain their advantage. Enough is enough. We are more connected now than ever before in human history, making it easier than ever before to organise ourselves against those in power. We need to elect people who are not afraid to push back against corporations and sign into law measures that will help the 99% and hurt the 1%. For too long the discourse has been controlled by people who benefit from things staying exactly as they are. The new generation has shown time and time again that we want change and it is only a matter of time before that wish is granted. Do not believe for one second that they have all the power. If we do that, they have won. We have the power. We can force change.

Is There a Relationship Between Income Inequality and Happiness on a National Scale?

Apr 5, 2018Aug 23, 2019 / Small Change / 6 Comments

We’ve all heard Bernie Sanders talk about how the top 1% of earners in the world own more than half of all global wealth. Unfortunately for most, Bernie is not wrong. In recent years, income inequality has been growing globally at an alarming and ever-increasing rate.

It has been growing, however, at vastly different speeds in different countries. It seems that the way in which a country legislates has a real and important effect on inequality. In this piece, I’ll examine the possible relationship between income inequality and happiness by looking at figures from, among others, the World Happiness Report (WHR) and the World Inequality Report (WIR)

It is definitely worth noting that happiness is a subjective and complex notion which surely depends on any number of factors outside of wealth. My aims here are simply to a) showcase some pieces of evidence (in the form of graphs from various sources) which suggest a link between inequality and happiness and b) to provide a largely theoretical discussion of the possible mechanisms for such a correlation and what the implications are if the correlation holds water.

Before I go any further, I’ll tell you a little about the measurements being used. For happiness (or more accurately ‘subjective wellbeing’), the figures come from so-called ‘Cantril ladder’ answers. The Cantril ladder question is simply asking people to rate how happy they are on a scale of 1 to 10. On which rung of the ladder do you think you are? An important point to mention is that the ‘0’ and the ’10’ on the scale are defined by the person being asked the question. One issue with this measurement is that answers may be more or less truthful depending on the culture in which they are being given. For example, it could be the case that Norwegian culture encourages people to exaggerate their happiness, skewing results.

For inequality measurements, the Gini Coefficient is perhaps the most useful here. The Gini Index shows how much inequality there is in a country on a scale of 0 (perfect equality) to 1 (perfect inequality) by measuring the “average distance between the income or wealth of all the pairs of individuals” (WIR). Some graphs included in this report, however, use more tools than just the Gini.

Oishi and Kesebir (Link in Sources)

Back in the seventies, Richard Easterlin, the ‘father of happiness economics’, formulated what came to be known as the Easterlin paradox. He found that while the rich people within a country were generally happier than the poor, richer countries were not necessarily happier than poor ones. While the US is the wealthiest country on earth, for example, it ranks just eighteenth in the 2018 World Happiness Report. Easterlin also found that an increase in the wealth of a country did not bring with it an increase in happiness. These results were very surprising and seemed to contradict themselves. Some researchers, like Shigehiro Oishi and Selin Kesebir, think that the final missing variable which explains Easterlin’s paradox is income inequality.

From World Happpiness Report – Link in Sources

The above graph from the WHR shows that while average US income more than doubled over the studied period, happiness was the same if not lower in 2016 than it was in the early seventies.

There could, of course, be any number of reasons for the findings shown in the above graph (WHR figure 7.1). A possible explanation is the idea of diminished returns. This is the concept that as we acquire more and more wealth, the happiness that a given quantity of money brings us diminishes. If most people won fifteen grand on the lottery, for example, the money would transform their lives for the better. If Bill Gates or Donald Trump won the same amount, it is debatable whether they would even notice.

Diminished returns could be one of the theoretical reasons why inequality should affect happiness. If, as the data shows, the majority of global wealth is being accumulated by people who already have plenty to spare, there will not be a huge ‘return’ of happiness. In a perfectly equal world, everybody requires the same amount to be satisfied. In a perfectly unequal world, the majority of people require little to be satisfied but do not receive even that because all the money is tied up in the bank accounts of people who take their yachts for granted.

From World Inequality Report – Link in Sources

Easterlin’s hypothesis was that our happiness depends not on the absolute wealth of the country we live in, but rather where we rank in the social pecking order within the country. This is the concept of ‘keeping up with the Joneses’, which could also be a possible mechanism whereby inequality may affect happiness. In a perfectly equal world, people look around and see that everyone around them has the same amount of money they do. In a perfectly unequal world, the vast majority of people can look around and see some people who own more money than they could make in a million lifetimes at their salary. This is not to say that everyone would be unhappy because of petty jealousy but it is disheartening for someone who is starving to see someone else participating in an eating competition until they make themselves sick. Higher income inequality means more people starving and more people who have enough money to last a hundred lifetimes, lying dormant and useless in an offshore bank account.

From World Inequality Database – Link in Sources

Figures from the World Inequality Database show that while the income of the Russian population grew by a total of 34% between 1980 and 2016, the income of the top 0.001% over the same period in Russia grew by a gargantuan 25,269%. When we look at the global rankings, we see that, for the most part, the most equal countries are also the happiest and the least equal are the least happy. Some readers may question here whether correlation implies causation or if external factors may be influencing the data. Happiness, after all is a slippery and complicated thing to measure. In the US, for example, low happiness levels relative to wealth may be due to such factors as high rates of gun violence, racism and obesity or any number of other problems.

From the Guardian – Link in Sources

However, if we look at the trends over time on a global scale, there seems to be a link and it is important that we explain that link if we are to learn how best to organise society in terms of subjective wellbeing. Perhaps some countries have both high happiness and low inequality because they have effective governments with a knack for social policy. These governments may provide the infrastructure for happiness through effective legislation aimed at increasing public wellbeing. Might it not be their legislation in other areas which increases national happiness, thus making our apparent link redundant?

It makes sense to me to conclude, at least, that part of the effective policy required to increase national happiness is legislation designed to minimise income inequality. Raising the minimum wage. Raising taxes for the wealthy and using that money for social goods. This is what smart governments do. I for one favour going one step further and introducing a universal basic income, a move which would dramatically reduce the wealth gap if carried out correctly. That, however, is a topic for another post. Legislation influences both the happiness of a country and its place in the Gini index. What is good for income equality may also be good for happiness.