Basic Income Guarantee: It’s Coming!

By Shlomo Maital  


     President-elect Trump promised many things in his election campaign. One of his promises was to restore the lost jobs of steelmakers in Pennsylvania and coal miners in West Virginia. Many doubt that this can be done. U.S. workers are more costly, and less productive, than those in other countries, in steel and in mining. If Trump protects them with high tariffs, other countries will retaliate, and everyone will lose as trade declines.

     America, Europe and virtually all nations have to face a hard fact. Many jobs are being destroyed, not by trade, but by technology. Robots will be able to do half of all existing jobs in a decade or two, according to research by Oxford University experts.   What then do we do about it?

     Switzerland and Finland have already held referendums on paying a cash grant to all citizens, as a kind of living wage. If the economy cannot provide jobs for people, then it must give them enough income to live on. There is no choice.

       Writing in the New York Times, Nov. 14 (“Handouts with a twist”), leading behavioral economist Robert H. Frank offers a concise analysis.

       Historically, social welfare legislation arose only when countries landed in deep hot water. For example, American social security was signed into law by President Franklin Roosevelt in 1935, at the depths of the Great Depression, with millions jobless and suffering. Unemployment insurance in the United States originated in Wisconsin in 1932 and quickly spread to state governments, for the same reason (unemployment at its worst was 25% in the U.S.). People were starving.

       Will it take a similar crisis to countries to enact the cash grant plan?

       Frank recalls that right-wing (Republican) economist Milton Friedman, a Nobel laureate in 1976, advocated a negative income tax, basically an income guarantee.   Friedman advocated a grant of $25,000 for a family of four, just above the poverty line. Frank proposes just such a grant, combined with “subminimum wages for performing useful public sector tasks”.

     This is simply an adequate social safety net. The U.S., and many countries, lack one at present. The result is immense suffering, especially for children of poor families. This is directly responsible for Trump’s election.

     But Frank is very practical. “Policies we adopt must be palatable to voters in the middle – the people who make significant sacrifices to earn the incomes we tax, to pay for social welfare programs.”   These voters would react angrily at the polls to efforts to pay money to able-bodied people who do not work. These are Trump voters.

     Frank thinks such cash grants, if they are small enough and combined with public service, could pass. The question is, will they be implemented before a deep crisis, or during and after?