Universal Basic Income

Getting paid for being alive

The Universal Basic Income — a guaranteed basic income for everybody for life — is an idea whose time might just have come. Still, it is not without its critics.  In this piece by Demos writer Matt Bruenig, he discusses some of the criticisms.

This is a topic Busted Utopia is going to look at a lot as go along.  (Also see the Explainer in the sidebar.)

The Universal Basic Income As Social Insurance’s Insurance

A universal basic income is a program that provides each person a specific sum of guaranteed social income every year. Recently, debates about the value of such a program reignited here on the left (see, among others, Max Sawicky, Steve Randy Waldman). I was too busy with the new wealth and poverty data to enter into the fray, but I want to do so now.

Sawicky’s criticism of the UBI primarily takes the form of noting social insurance, which allocates cash and other benefits according to set conditions rather than universally, is better than the UBI. I don’t find this point that damning because a UBI and social insurance are not incompatible with one another. You can have both simultaneously, and you should have both simultaneously.

As good as social insurance is, it has a number of problems that a UBI (even a modest one) can help to remedy. Here I address two of them: 1) social insurance sometimes fails to provide benefits to those who qualify, and 2) social insurance fails to contemplate and therefore insure against every possible scenario where people find themselves in dire straits.

Imperfect Administration

Let’s suppose you had a social insurance scheme that was really well put together (like the Nordics have, unlike what we have). The rules and conditions and means-testing and such was spot on and actually somehow anticipated all of the scenarios where market institutions fail people. In such a hypothetical world, it would still be the case that problems in administration would cause people in need to be denied benefits that they should get.

From the abstract policy wonk perspective, it is easy to forget that conditional benefits don’t operate like computer code. There are people and processes charged with figuring out whether someone actually meets them. And those people and processes don’t always work the way that they should.

For example, consider unemployment insurance. Each state has their own rules for what makes you eligible for these benefits, but I am only familiar with Massachusetts’ rules, and so that will be my focus here. In MA, the overarching rule is that when you are fired from work, you get benefits. When you quit, you don’t. These conditions seem to make sense insofar as you don’t want people to quit jobs and go on unemployment; rather, you want them to keep their job and quit only if they have some other one lined up.

But immediately, this formulation runs into problems. Suppose an employee knows that quitting disqualifies them from benefits and so they do things that gets them fired instead. This circumvents the purpose of the conditions. So you have to protect against it. In MA, protecting against this contingency involved adding the proviso that a termination won’t lead to benefits if it is “attributable to deliberate misconduct in wilful disregard of the employing unit’s interest, or to a knowing violation of a reasonable and uniformly enforced rule or policy of the employer, provided that such violation is not shown to be as a result of the employee’s incompetence.” Imagine the administrative law judge applying this rule. How do they know if the misconduct was deliberate, the disregard was willful, the violation was knowing, the employer’s rule/policy was reasonable and uniformly enforced, or the employee was merely incompetent?

The formulation runs into a problem in the other direction as well. Suppose an employer knows that getting the employee to quit will mean they won’t get unemployment benefits (which sometimes matters to employers depending on how they are paid). Accordingly, the employer tries to make things so bad on the employee that they quit. This defeats the point of unemployment benefits and so it also needs a protection. In MA, that protection comes in the form of an exception for voluntary quits where there is “good cause for leaving attributable to the employing unit or its agent.” What do you suppose “good cause” is? Do you think administrative law judges have some special insight into what makes a cause “good”?

Finally, the formulation runs into the problem of people who have to quit because of some other life event that is not the fault of the employer. To deny unemployment benefits in such cases would also go against the point of the program. In MA, this contingency is dealt with by excepting from benefit disqualification those whose “reasons for leaving were for such an urgent, compelling and necessitous nature as to make his separation involuntary.” Once again, the question is: how does an administrative law judge know what “urgent” and “compelling” and “necessitous” reasons are? Do you think it’s possible that sometimes people have reasons that are actually “compelling” (whatever that means) but that the judge doesn’t think so and denies them benefits?

I used to help low-income people navigate through the unemployment appeals process, and I actually saw the circus that is examiners and judges squinting hard at these phrases and trying to apply them to given cases. I am sure most unemployment claims process without issue, but it’s clear some don’t. Some claimants wind up denied benefits that they are legitimately owed because applying the conditions is error-prone.

A UBI, even a modest one, would act as a universal backstop to social insurance programs like unemployment benefits to ensure that those wrongly denied benefits still have something to rely on. It is social insurance insurance.

Imperfect Anticipation

To work at all, social insurance programs have to anticipate certain models of living. But not all lives fit into these models of living. People who live such lives can find themselves ineligible for social insurance programs even though they are in needy circumstances.

For instance, many of our programs take into account how many children an adult applicant has, e.g. SNAP and EITC. These programs anticipate a model of living in which children live with one or more adults full time. But sometimes, children might live in a number of households throughout the week: a few days with mom, a few days with dad, a few days with the grandparents, or whatever. Normally, only one person gets to be the official guardian for the kid for purposes of these programs, but that doesn’t reflect the reality of what’s going on. If you aren’t the official guardian, you might find yourself ineligible for SNAP or EITC even though your need (adjusted for the fact that you are partially caring for a child) might rise to the level where those programs probably should at least give you something.

This is just one example, but the basic point is clear: there will always be some people who wind up ineligible for benefits because their life circumstances have not been anticipated by the social insurance regime. The UBI acts like a backstop in those cases as well, once again as a social insurance insurance.

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