Earlier this week, the Canadian province of Ontario announced it would be conducting a pilot program for 4,000 of its residents, guaranteeing each person minimum income even if they did not work. While the idea of giving away “free money” may draw criticism from some, this is not a new concept. In fact, programs similar to this have been around for nearly 50 years, with the ultimate goal of eventually replacing the welfare system as we know it.

Read on further to find out more about guaranteed basic income (otherwise known as universal basic income or basic income), its purpose, the history behind it, and how it might impact the future of welfare programs worldwide.

Guaranteed Basic Income?

So what is guaranteed basic income (GBI)? According to the Basic Income Earth Network (BIEN), this type of payment has five key characteristics: it is paid in intervals instead of all at once, the medium used allows the recipient to use it any way they want (it is not a Food Stamp card, for example), it is paid on an individual basis only, it is paid without a means test, and those that receive it are not required to work.

Everything else, such as the amount of money in each payment or longevity of payments varies based on the proposal. (In the Ontario test case it does have an income threshold and is paid to only the 4,000 included in the program; the rest of the principles still apply.)

The Purpose of GBI

Guaranteed basic income is not really “free money,” as some may claim; it does serve a few important purposes. An article from Law Streeter Eric Essagof already does a great job of explaining the GBI’s use in fighting poverty. Namely, the income encourages people to keep working, while also ensuring that if their income rises, they won’t automatically lose the benefits they rely on (also known as the “poverty trap”). In addition, in the United States at least, it could streamline a complicated system where someone who needs benefits has to sign up for five different programs that all fall under one welfare system.

There are other potential benefits associated with a guaranteed basic income. If people were assured of at least some income, they might be more likely to go to school for more education or training or even take a chance and start their own business. They could also pursue passions (such as writing, for example) that they are harder to take on when their time is dictated by the necessity to make money. For individual workers, a guaranteed income would also enable them to bargain more effectively with their employers and force employers to agree to concessions in order to keep their workers.

History of GBI

The Ontario GBI pilot program is certainly not the first of its kind; in fact, it is not even the first in Canada. The first program was conducted in the province of Manitoba in the 1970s, and led to societal health improvements while simultaneously not discouraging work participation. The idea for a universal basic income can be traced even further back than that–much further, in fact. In 1797 Thomas Paine, a pamphleteer famous for his work “Common Sense” in support of the American Revolution, stated that in exchange for social consensus among the people, the government should offer yearly payments to its citizens.

Since then there have been numerous debates between thinkers on all sides of the political spectrum, but generally basic income has been viewed as a positive. The accompanying video looks at the evolution of the basic income idea:

This type of program and the philosophy behind it have been embraced outside of Canada as well. The most recent effort was in Finland: earlier this year, the Finnish government selected 2,000 unemployed people at random to begin receiving a guaranteed basic income of €560 for two years instead of the unemployment benefits they had been receiving. The major advantage to this for the participants would be that if they found jobs they would still get to keep their basic income, as opposed to losing unemployment benefits.

Through the Finnish trial, which is still ongoing, the government wants to see whether this type of program can help the country’s ailing economy by encouraging part-time work. In addition to this trial, other similar programs worldwide have proven successful, such as one in Brazil in 2004 and another in Namibia in 2007. There was also a similar cash transfer pilot program in India from 2011 to 2012 that led to increased test scores and improved health in participating villages.

Despite the success of many of these programs, there seems to be a perception that they can only be successful in poorer countries and would never work in an “affluent” country like the United States. However, even the United States has some history with the guaranteed basic income. One of the earliest efforts, the Negative Income Tax Experiments, took place between 1968 and 1990 in New Jersey, Pennsylvania, Iowa, North Carolina, Indiana, Washington state, and Colorado. Although these experiments had successful outcomes, they were not politically popular and they lost their momentum. Arguably the most successful experiment so far concerning guaranteed basic income in the U.S. is currently ongoing, and can be found in Alaska.

In 1976, a permanent fund was set up in Alaska to preserve profits made by the oil industry to ensure that the wealth would benefit future populations in the state. This fund was allocated for a basic income program in 1982, and ever since then anyone living in the state for at least six months is eligible to receive a dividend from the state. At its peak in 2008, the fund annually paid out more than $2,000 per resident.

The following video looks at how the program is playing out in Finland and other places:

Future of GBI

With more and more places willing to at least launch guaranteed basic income pilot programs, the future of the measure seems bright. This is especially true given the benefits that it so far has offered, along with the fact that automation is increasingly making many jobs obsolete. Currently, along with Finland, there are also ongoing guaranteed basic income trials occurring in Italy and the Netherlands, with Scotland considering a trial of its own as well.

While a basic income has been advocated by some philosophers, researchers, and other individuals, overall there has not been a tremendous groundswell of support. Even in places where pilot programs have been launched, these are usually only reserved for a few thousand people in countries with tens if not hundreds of millions of citizens. So, if this program has repeatedly proven so successful and could replace faulty welfare programs, why are countries not more willing to try them?

The answer starts with cost. In 2016, Swiss voters rejected a basic income for the country’s citizens, and while Scotland is considering adopting such program, the rest of the UK in general is resistant. This opposition comes even when polls show that up to 64 percent of Europeans approve of a basic income. Part of that, however, might be attributed to how the survey questions were worded, in that they do not mention tax increases necessary to provide that income.

Aside from cost, there are other considerations, such as the fear of automation. Although some fear this trend could lead to a dearth of jobs, some economists are quick to point out this same thesis has been made before with regard to past trends, and has been proven wrong by new innovations that, in fact, created more jobs. Additionally, while some want to use basic income to replace existing safety nets, there is no proof yet that exchanging one for the other is actually superior. Even some of the protections basic income is supposed to offer can be turned on their head, with a basic income convincing some employers they can pay lower wages. There’s also the argument that basic income will lead to people choosing simply not to work. The video below looks at basic income, highlighting some pros and cons:

Conclusion

Guaranteed or universal basic income as an idea has been around for hundreds of years. As an idea put into practice, it has been around for at least around half a century. Moreover, in seemingly every case, pilot programs incorporating basic income guarantees have been successful in a number of measures, from raising GDP and improving test scores to ensuring nutrition. Furthermore, these types of programs have been lauded by leaders on all parts of the political spectrum as everything from a panacea for solving the broken welfare system to necessary in a world that is increasingly automated.

However, for all its success stories, guaranteed income has never become widespread nor long-lasting. The reasons for this apparent contradiction are manifold and run the gamut from high costs to exaggerated benefits. Additionally, for every country that has adopted and embraced the idea there are others that have rejected it.

What is basic income’s outlook then? In a world that is increasingly feeling budget cuts and squeezes, it seems unlikely a major initiative to expand the program is possible, especially given the ascendance of more conservative leaders who rose to power partially on attacks of the social welfare system. Basic income, then, is unlikely to be guaranteed or universal anytime soon, yet continued successful trials indicate that when conditions are more favorable, it could become the norm.

Michael Sliwinski

Michael Sliwinski (@MoneyMike4289) is a 2011 graduate of Ohio University in Athens with a Bachelor’s in History, as well as a 2014 graduate of the University of Georgia with a Master’s in International Policy. In his free time he enjoys writing, reading, and outdoor activites, particularly basketball. Contact Michael at staff@LawStreetMedia.com.

The post A Right to Life, Liberty and a Basic Income?: The History of Guaranteed Basic Income appeared first on Law Street.

Since President Lyndon Johnson’s War on Poverty, there has been a debate on how to best give the poorest Americans a chance at a prosperous life. Federal assistance programs have come and gone with plenty of critics, but what if the solution was as simple as giving every American a check? Read on to learn about the plan that’s uniting liberals and conservatives.

What is a basic income?

A basic income is just what it sounds like: the government gives every citizen enough money to survive. This check would replace food stamps, unemployment insurance, and most of our welfare system. Most American proposals for a basic income provide for $1,000 a month, or roughly how much someone earning the federal minimum wage, $7.25 per hour, makes.

Why replace our current welfare system? If it ain’t broke…

It’s broken, very broken. This is partly because the term “welfare system” does not refer to one system. It is multiple social programs managed by different government bureaucracies. Food stamps, unemployment insurance, Temporary Assistance For Needy Families (TANF), and Child Nutrition programs (CHIP) are all examples of social programs that are broadly referred to as welfare. According to the Cato Institute, there are 126 different federal assistance programs. Anyone trying to receive government assistance has to apply to all of these separate programs which carry their own paperwork and contradictory requirements.

There is also the problem known as the “poverty trap.” This is when those receiving assistance risk losing money by taking a higher paying job. It sounds contradictory, but this anecdote from Harvard Professor Jeff Liebman explains the problem.

The woman in his story, let us call her Mary, moves from a job that pays $25,000 to a job that pays $35,000. This is great for her, except for the fact that she relies on government benefits. With this new job, she earns enough so that she no longer qualifies for many of the social programs she depends on. She no longer can get free health insurance, she has lost title eight housing benefits, she lost her child care voucher, she lost her EITC benefits, and she is now paying payroll tax. Added all up, Mary is actually making less money with a higher paying job. When welfare recipients are discouraged from taking higher jobs, they are discouraged from improving their lives to the point where they will no longer need welfare.

A basic income would get rid of the poverty trap. Mary could quit her lower salary job and even take her time to find a job that is right for her without having to worry about losing her support system.

For being such a failure, the current welfare system is also really expensive. America spends approximately $1 trillion on the welfare system. That’s $14,848 per person. This graph from The Heritage Foundation gives an idea of how that is split up between programs.

Basic income would also be expensive, but it would provide recipients the freedom they need to find good work.

Wouldn’t everyone just stop working?

It’s possible. While proponents of a basic income argue that removing the poverty gap is a huge incentive to work, critics argue that an unconditional check in the mail will disincentivize work. Belgian philosopher Philippe Van Parijs, describes the basic income as giving impoverished people “the real freedom to pursue the realization of one’s conception of the good life.” The good life in one person’s eyes could be having a lucrative job. In another’s eyes, it could be living off of the government dime and doing nothing. Proponents of the basic income, like US Basic Income Guarantee Network Board Member Alan Sheahen, believe that most people want to work:

This is a problem that nearly every welfare plan has to grapple with. Requiring work puts people in a poverty trap. Unconditional benefits allow them to coast without work.

Does any country do this?

There is no country that has replaced their welfare system with a guaranteed basic income. However, there are countries that give their citizens unconditional money and there are countries that have proposed this plan.

The best example would be in India, where a pilot program was implemented in 2011. This pilot program included an urban program, whose recipients were given 1000 rupees a month, a rural program, whose recipients were given 200 rupees a month, and a control group, whose participants received no basic income.

What happened next was amazing: Participants in the program spent more on healthy food than they did when they received subsidized food. These groups also spent more on medical services, and housing. The most impressive result was that these families spent significantly more on school supplies than the control group. As a result, school attendance in the participating villages increased to three times the level of the control villages.

Switzerland might become the first country to implement a basic income nationwide. They will soon vote on a referendum to their constitution guaranteeing the right of a basic income to all. However, it is unclear how a Swiss basic income would be implemented, if it were to even pass. There have been no studies in Switzerland, and only one advocacy group has been pushing the issue. Switzerland’s form of democracy requires only 100,000 signatures to get any issue on the ballot as a referendum, so the plan might not even have broad public support.

Has this ever been proposed in the United States?

The closest proposal to a guaranteed income in the United States was President Richard Nixon’s Family Assistance Plan (FAP). FAP was not a basic income for all, but it was similar. Any family with children where one of the parents worked or were registered with the United States Employment services was eligible for a minimum stipend. Once again, it was not a check in the mail for every American, but it was and still is the closest proposal to basic income this country has ever seen.

So, what happened? It passed the House of Representatives, but died in a Senate committee. Conservatives thought the idea of free money was too far to the left and Democrats thought the work requirement placed it too far to the right.

Here’s Nixon’s indictment of the welfare system and presentation of FAP, courtesy of the Richard Nixon Foundation:

In modern America, the closest example of a basic income is in Alaska, where the state unconditionally gives a portion of their oil revenues to their citizens. The payout varies depending on oil sales, so it is not a dependable source of income, but it is still significant.

Is this a liberal or conservative idea?

Actually, it is both. Liberals and conservatives have both embraced a guaranteed basic income.

Milton Friedman, one of the most influential conservative economists ever, proposed replacing the welfare system with a “negative income tax.” Every citizen would get a tax transfer, and would then be taxed on that transfer based on how much money they earned. Friedmann, like other prominent conservatives, supported the basic income because it took power away from the federal government and the many bureaucracies that managed the welfare state.

Liberals like the basic income because it works to reduce inequality. It also has the added benefit of giving workers the ability to demand better work conditions from employers without fearing a loss of financial security.

Since this is so bipartisan, is it going to happen?

Unlikely. Americans are not the biggest fans of redistribution, and a basic income is redistribution at its purest form. In a nation where 60 percent of the citizenry believe that the poor can become rich by trying harder, it is unlikely that a basic income will gain broad public support.

Watch this report from PBS to learn about the broad support basic income has amongst liberal and conservative thinkers, the movements in Europe to enact similar plans, and the opposition it faces at home.

Conclusion

While support for a basic income reaches across the aisle, it is too untested to be implemented in a country as large as the United States and it goes against the American ideal of earning every dollar made. Keep an eye on countries like Switzerland and India to see if this really is the solution to poverty that the world has been looking for.

Resources

Primary

Basic Income News: Indian: Basic Income Pilot Project Finds Results of India’s pilot program

Additional

PBS Newshour: Will a Guaranteed Income Ever Come to America?

City Journal: Why Not a Negative Income Tax?

Adam Smith Institute: The Ideal Welfare System is a Basic Income

Slate: EITC Isn’t the Alternative to a Minimum Wage, This is

Economist: The Cheque is in the Mail

Carnegie Mellon University: Truth in Giving: Experimental Evidence on the Welfare Effects of Informed Giving to the Poor

Harvard University: Fairness and Redistribution

Economist: Taxing Hard-Up Americans at 95 Percent

Cato Institute: The American Welfare State: How We Spend Nearly $1 Trillion a Year Fighting Poverty–and Fail

Washington Post: Thinking Utopian: How About a Universal Basic Income?

Bloomberg: The Swiss Join the Fight Against Inequality

Basic Income Earth Network: Quarterly Newsletter

Eric Essagof

Eric Essagof attended The George Washington University majoring in Political Science. He writes about how decisions made in DC impact the rest of the country. He is a Twitter addict, hip-hop fan, and intramural sports referee in his spare time. Contact Eric at staff@LawStreetMedia.com.

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