Guaranteed Income vs. Guaranteed Work

Living in a socialist society would mean awakening each workday and heading to your worker cooperative, while regularly visiting your voting place to help decide local and national policies. But it is more than that—and has to be. The State has a few important services to provide if the socialist dream of prosperity and dignity for all people is to be achieved.

What if, for instance, you cannot find a job? Just because all workplaces are democratic and share profits does not mean there will always be enough jobs when and where you need one. There is no room in a socialist nation for unemployment, poverty, homelessness, and so on, and thus some mechanism is needed to guarantee that we only see these horrors in history books. Every person, regardless of who you are or what work you do, should make enough to have a comfortable life—which requires a high minimum wage (required by law but inherent in worker ownership) and guaranteed access to an income. There are two paths forward to eradicating the horrors, stated succinctly by Dr. King: “We must create full employment, or we must create incomes.”[1] Guaranteed work or a guaranteed income. Either would be adequate, but there are positives and negatives of each to weigh.

Let’s first consider a guaranteed income, or universal basic income (UBI). All UBI entails is using tax revenue to send a regular check to each citizen, a simple redistribution of wealth to eradicate poverty and provide security during times of unemployment or underemployment. Its simplicity is a major advantage over guaranteed work.

UBI has been around for a while in various forms. Alaska has given $1,000-$2,000 a year to every resident without condition since 1982.[2] Hawaii may follow suit soon.[3] The Eastern Band of the Cherokee Nation launched its own UBI in 1996, and today gives $10,000 a year to each of its members, which has helped reduce behavioral problems and crime.[4] Iran from 2010 to 2016 had the world’s first national UBI, giving each family the equivalent of $16,300 a year.[5] For one year, 2011, Kuwait gave $3,500 to each citizen.[6] In 2017, Macau, a region of China, began giving over $1,100 a year to each permanent resident.[7]

Trials in some of India’s villages that began in 2011 show huge success in improving children’s education, access to food and healthcare, and the total number of new business startups.[8] Other past small-scale experiments were conducted in the U.S., Canada, Brazil, Namibia, and elsewhere. Models range from everyone getting the same amount to poorer recipients getting more while richer ones less (which even some conservatives support in the form of the Earned Income Tax Credit or even a negative income tax[9]). Studies indicate that when people have this financial security they spend more time taking care of family, more time focusing on education, and are able to win higher raises at work because they have a more serious option to leave, leverage they did not have before.[10] Contrary to myth, giving poor people cash tends to have no impact on or reduce alcohol and tobacco consumption, likely because paying for healthcare, education, and so forth is suddenly an option and people want to direct their resources there.[11] In 2017, experiments with UBI launched or were preparing to launch in various places in Finland, Canada, Kenya, Uganda, the Netherlands, Scotland, Spain, and the U.S.[12]

“A guaranteed annual income could be done for about twenty billion dollars a year,” Dr. King estimated in 1967. “If our nation can spend thirty-five billion dollars a year to fight an unjust, evil war in Vietnam, and twenty billion dollars to put a man on the moon, it can spend billions of dollars to put God’s children on their own two feet right here on earth.”[13] The question of priorities in spending is as relevant as ever. The cost of American UBI would depend on similar factors: how much would be guaranteed, if everyone would receive it (if the rich do not then it’s not technically UBI, but no matter), and so on. $10,000 a year for all 240 million U.S. adults is $2.4 trillion, $15,000 a year for the poorest 50 million people is $750 billion, etc. Of course, the net cost would be lower, as giving tens of millions or hundreds of millions of people greater purchasing power would put the economy into overdrive—that money would be spent, enriching co-ops and thus increasing State tax revenues (this is also why economic research overwhelming shows higher minimum wages do not lead to higher unemployment or prices; extra money is spent at businesses, boosting their profits, balancing the system out[14]). “People must be made consumers by one method or the other,” King said when discussing guaranteed income or work.[15] One study estimated giving each American adult $1,000 a month would grow the economy 12-13% over eight years, or by $2.5 trillion, if employment remained steady.[16] It is important to keep the cyclical nature of this system in mind while considering costs. UBI is expensive, but it also increases tax revenue.

Now, major concern exists that UBI will cause people to stop working, hurting the economy and leaving the worker-owners stuck supporting the easy lifestyle of the lazy. As we have seen, at some point in the human future automation will essentially make labor a thing of the past, highlighting the need for both collective ownership of the machines and State-provided incomes. So it seems obvious that at some point we will have to give up our agitation over people who do not work (rather, poor or middle income people who do not work; critics seem less concerned about the wealthy types who enjoy work-free lives). We won’t be able to absurdly base people’s value on how many hours they work or what sort of work they do. Everyone will spend their days as they see fit, some choosing to design skyscrapers (even though machines could do it for them) because they enjoy it, others doing nothing all day because they enjoy that more. But until machines can serve our every need, the point is a valid one, as some people will indeed prefer not to have a job, while supported by the labor of others. (On the positive side, there would be decreased competition for jobs for those seeking them.) This wouldn’t bother all worker-owners, but it would be reality. In five experiments on guaranteed income done in the U.S. and Canada, the decrease in the labor participation rate ranged from zero to 30%.[17] However, most studies show no effect or only a small decline.[18] Donald Rumsfeld and Dick Cheney ran UBI experiments in a few cities for President Nixon, and found work rates remained steady.[19] A study of Alaska found employment levels weren’t affected. A study of Iran’s UBI revealed some people worked a bit less, but some actually worked more.[20] India’s basic income grants led to more labor, as did Uganda’s.[21] Namibia saw no negative effects on labor participation.[22] Naturally, the decline depends on how much is received, but it is predictable that UBI will mean some people will choose not to work. Importantly, with so much to do to rebuild and maintain our society, is UBI yet wholly practical? Will enough citizens volunteer to participate in all the unpleasant tasks that make a society function, such as repaving roads or waste disposal, if a high income is guaranteed? Would necessary tasks remain undone because Americans would want to pursue other things? These nagging questions will spur some to throw out the whole idea, insist the monthly amount must be low enough to force people to get jobs, or propose a higher UBI for people willing to do unpleasant work. All told, UBI would have to be implemented strategically, perhaps beginning at a level that eradicates poverty and slowly increasing as humanity approaches the point where machines can take care of all undesirable duties.

Guaranteed work is a more complex system, but avoids the concerns associated with lower labor participation. In fact, there would be a job for all. “If Government in our present clumsy fashion must go on,” Ralph Waldo Emerson said in 1843, “could it not assume the charge of providing each citizen, on his coming of age, with a pair of acres, to enable him to get his bread honestly?”[23] In a society offering guaranteed work, federal tax revenue could be transferred to municipalities to create salaries for unemployed or underemployed people. City governments would use the funds to launch public work projects to improve their communities (what projects would be a local democratic decision, of course). So if a city has 50,000 people looking for work at the start of the year, it might receive $2 billion, to offer a $40,000 salary to each person. If the U.S. had 8 million unemployed, it would cost $320 billion to employ them—half our modern military budget. Prioritization is easy enough. Dr. King said, “If America does not use her vast resources of wealth to end poverty and make it possible for all of God’s children to have the basic necessities of life, she too will go to hell.”[24] As with UBI, however, broadening purchasing power will reduce the net cost through increased tax revenues.

Workers can be hired to rebuild our crumbling inner cities, install solar panels on homes, plant trees, tutor struggling students, spend time with neglected seniors—literally any task that betters society in some way. Because not all positive tasks require physical labor, the program would be inclusive of many persons with disabilities or even seniors who want to work (though obviously not intended to replace social security or disability insurance). Cities will need more funds than just those for salaries, however, sums dependent on the type of project. Some projects will be relatively cheap, like cleaning trash off the streets, others more expensive, like renovating a school. Extra funds could nevertheless be fixed to a city’s unemployment level. Using their allotted monies, cities could contract with local co-ops to supply equipment and raw materials for necessary ventures. Public workers would also receive help securing employment at a cooperative, where higher incomes, democracy, and ownership can be enjoyed, so that the public sector doesn’t continually grow. Rather than shrink the private sector, however, guaranteed work programs can actually expand it—fewer unemployed persons means more spenders, benefiting businesses and allowing them to expand.[25]

Co-ops could also receive federal funds, allowing them to take on more worker-owners. This needn’t be a permanent relationship. The State could fund a position for a year, giving a co-op time to absorb a new member. Cooperatives would get another worker, and thus greater productivity and more profits, for nothing, in return for guaranteeing the worker a permanent job and ownership after the year ended. Co-ops could further receive government contracts to do certain projects, as businesses do today, with increased employment stipulations. Alternatively, cities could organize unemployed persons into new cooperatives, helping fund the endeavor during the first few years, until it became self-sustaining (whether for-profit or nonprofit). If there was a need for greater production in a certain sector, from agriculture to social work, that need could be met with new co-ops.[26]

There is much precedent for guaranteed work. Generally speaking, employment by the State is something we take for granted. Critics of paying citizens to work often have no qualms over paying citizens to be soldiers or police officers. If one can be called necessary for protection, the other can be called necessary for poverty’s demise. Local governments across the U.S. employ 14.1 million people, over half of them in education, the rest in healthcare, fire and policing, financing and administration, transportation, library services, utilities, environment and recreation—and public works.[27] (States employ another 5 million, and the federal government employs over 2.5 million civilians and over 2 million active and reserved military personnel.[28]) More specifically, during the Great Depression, President Roosevelt’s Works Progress Administration, Civil Works Administration, and Civilian Conservation Corps hired some 15.5 million people to build roads, bridges, schools, hospitals, museums, and zoos; to garden, plant trees, fight fires, reseed land, save wildlife, and sew; to undertake art, music, drama, education, writing, and literacy projects. While not without challenges, public works saved many families from hunger, strengthened the consumer class and thus the economy, and beautified the country.[29] Roosevelt actually included “the right to a useful and remunerative job” in his 1944 Second Bill of Rights.[30] Similar federal initiatives have occurred since, such as the Comprehensive Employment and Training Act of the 1970s, which employed 750,000 people by 1978.[31] (In countless other programs, like the Public Works Administration of the 1930s, the U.S. government indirectly created jobs by paying businesses to tackle huge projects. Construction of the Interstate Highway System in the 1950s and 60s entailed the federal government funding the states, which either expanded their public workforces or contracted with private companies.) Today, cities like Reno, Albuquerque, Tempe, Fort Worth, Chicago, Denver, Portland, and Los Angeles offer jobs to the homeless to help them out of the social pit. Cities elsewhere in the world do the same.[32]

Governments around the world run programs similar to our New Deal. India is pouring billions into the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which gives, or rather tries to give, residents of a few poor, rural states one hundred days of guaranteed work annually.[33] 50 million households, 170 million people, are involved—the largest public works program in world history.[34] Other nations, especially in Europe, have made the government the employer of last resort at various times.[35] So have South Africa and Argentina. Argentina’s Jefes de Hogar program paid the heads of household with children, persons with disabilities, or pregnant women to do community service, construction, and maintenance work. 2 million Argentinians, 5% of the population, were employed at its height.[36] South Africa’s Expanded Public Works Program includes government jobs in infrastructure, tourism, environment, early childhood education, and more.[37] As in the U.S., local, state, and national governments around the world may not offer guaranteed work but do offer public works jobs. These efforts and countless others have dealt serious blows to unemployment and poverty. Wages even rise in the private sector, because it must compete with the public sector for workers. “We must develop a federal program of public works, retraining, and jobs for all,” Dr. King said, “so that none, white or black, will have cause to feel threatened.”[38]

One criticism of guaranteed work is that unemployment dropping too low will herald inflation. It is said if unemployment is eliminated then businesses will have to compete for fewer workers, driving wages up, which will drive up the cost of everything else to compensate, which will lead to higher wage demands, all in an unending upward wage-price spiral. This is not actually as grave a concern as one might imagine. First, the correlation between unemployment and inflation is not terribly strong: sometimes they move in opposite directions, sometimes they move together.[39] Mainstream economists are increasingly acknowledging the relationship is weak or nonexistent. It’s easy to see why more workers doesn’t necessarily mean higher prices. Increased profits from more consumers spending more money help firms absorb higher wage costs without raising prices. Again, even drastic increases in the minimum wage create only tiny increases in prices, making the wage increase plainly worth it.[40] To stay competitive there is every incentive for firms to expand production, and thus sales, or take a bite out of profits rather than raise prices on consumers. Many economists have argued persuasively that, contrary to William Phillips, Milton Friedman, and others, full employment can be achieved without inflation.[41]

Second, if upward wage pressure became so great it could not be absorbed, and prices rose, there is reason to predict this would be a brief phase, not an eternal spiral. It is not likely the upward pressure on wages would last. Say the public worker salary was set at $38,000 a year (we’ll say that is also the minimum wage). If you worked for a capitalist firm making $38,000, you would likely be able to convince the capitalist to give you a raise—otherwise you could leave, guaranteed to make the same in the public sector. You win a raise and are then making $40,000. But if you continue pushing over time, the potential loss due to ultimate failure (being let go, replaced by someone cheaper, someone from the public sector wanting to make more) rises—it’s at $2,000 now and will only get bigger.[42] So there is a disincentive that keeps higher wage demands down. The capitalist may get rid of you and you’ll be worse off financially than you were. A guaranteed job gives people more power and leverage, but not so much to create an inflationary disaster; with limits on the upward pressure of wages come limits on price increases, which tend to be tiny proportions of income increases anyway. At a cooperative, as raises are determined democratically, the majority would have to repeatedly vote to both give raises to all and to raise prices on consumers—this seems just as unlikely, perhaps more so, as a single capitalist continuously doing this.

Third, more production of goods and services through the public sector, like increased purchasing power, increases supply and thus pulls price down.[43] Fourth, various effective tactics the State uses to control inflation will still exist under socialism.[44] In practice, at least regarding partial guaranteed employment and public works ventures, skyrocketing inflation is a nonissue. The Reserve Bank of India found that the MGNREGA program did not raise food prices.[45] We know that Argentina’s inflation was extremely high in 2002, when its works program began, but declined and remained relatively low past 2007, when the program ended, until 2013.[46] South Africa’s ongoing program began in 2004; inflation grew by over 10% by 2009, during economic crisis, but then fell and remained low through 2018.[47] The four points above also answer concerns about UBI and inflation. Further, studies of Alaska, Kuwait, Lebanon, Mexico, India, and African nations have at least shown that a small UBI does not cause inflation.[48]

Whether UBI, guaranteed work, or a combination of both (guaranteed work followed by UBI, for example, so no one is stuck doing pointless work for a city while co-op members get rich off machines that can do all tasks) is implemented, one of these strategies will be necessary as a safety net for those struggling to find a job. With it we can eradicate need and want forever. “Overcoming poverty is not a task of charity, it is an act of justice,” Nelson Mandela said. “Like Slavery and Apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings.”[49] Either system would have other significant effects on society, too, such as replacing many older forms of welfare, freeing people from the fear of quitting a job they do not enjoy, giving people greater ability to strike—a tactic that may not entirely disappear with worker ownership, as some worker-owners may be so opposed to a majority decision they walk out—and more.[50]

For more from the author, subscribe and follow or read his books.

Notes

[1] Martin Luther King, “Where Do We Go From Here?” (speech, 11th Annual Southern Christian Leadership Conference Convention, Atlanta, GA, August 16, 1967).

[2] https://motherboard.vice.com/en_us/article/jp5wdb/only-state-free-money-alaska

[3] https://www.vox.com/policy-and-politics/2017/6/15/15806870/hawaii-universal-basic-income

[4] http://edition.cnn.com/2015/03/01/opinion/sutter-basic-income/

[5] https://www.weforum.org/agenda/2017/05/iran-introduced-a-basic-income-scheme-and-something-strange-happened

[6] http://basicincome.org/news/2011/05/kuwait-a-temporary-partial-basic-income-for-citizens-only/

[7] http://basicincome.org/news/2017/07/wealth-partaking-scheme-macaus-small-ubi/

[8] https://mondediplo.com/2013/05/04income

[9] Milton Friedman, Free to Choose

[10] https://catalyst-journal.com/vol1/no3/debating-basic-income

[11] https://qz.com/853651/definitive-data-on-what-poor-people-buy-when-theyre-just-given-cash/; http://documents.worldbank.org/curated/en/617631468001808739/pdf/WPS6886.pdf

[12] http://basicincome.org/news/2017/10/overview-of-current-basic-income-related-experiments-october-2017/; http://time.com/money/5114349/universal-basic-income-stockton/

[13] Martin Luther King, “Where Do We Go From Here?” (speech, 11th Annual Southern Christian Leadership Conference Convention, Atlanta, GA, August 16, 1967).

[14] https://gsgriffin.com/2016/12/08/the-last-article-on-the-minimum-wage-you-will-ever-need-to-read/

[15] Martin Luther King, “Where Do We Go From Here?” (speech, 11th Annual Southern Christian Leadership Conference Convention, Atlanta, GA, August 16, 1967).

[16] https://www.weforum.org/agenda/2017/09/a-basic-income-could-boost-the-us-economy-by-2-5-trillion/

[17] https://catalyst-journal.com/vol1/no3/debating-basic-income

[18] https://www.vox.com/policy-and-politics/2017/8/30/16220134/universal-basic-income-roosevelt-institute-economic-growth

[19] https://qz.com/931291/dick-cheney-and-donald-rumsfeld-ran-a-universal-basic-income-experiment-for-president-richard-nixon/

[20] https://www.weforum.org/agenda/2017/05/iran-introduced-a-basic-income-scheme-and-something-strange-happened

[21] http://isa-global-dialogue.net/indias-great-experiment-the-transformative-potential-of-basic-income-grants/; http://www.unicef.in/Uploads/Publications/Resources/pub_doc83.pdf; https://medium.com/basic-income/evidence-and-more-evidence-of-the-effect-on-inflation-of-free-money-a3dcc2a9ea9e

[22] http://bignam.org/Publications/BIG_Assessment_report_08b.pdf

[23] http://books.google.com/books?id=04NPax82MZQC&pg=PA70&lpg=PA70&dq=ralph+waldo+emerson+socialism&source=bl&ots=9Cp_2uKvRI&sig=AfJfiT0oIr3L4XRC2hpxaA93sgs&hl=en&sa=X&ei=sZgkVMbKH4GUyATVlILoCQ&ved=0CDYQ6AEwBA#v=onepage&q=ralph%20waldo%20emerson%20socialism&f=false

[24] http://www.truth-out.org/progressivepicks/item/28568-martin-luther-king-jr-all-labor-has-dignity

[25] https://democracyjournal.org/magazine/44/youre-hired/

[26] Alec Nove, Essential Works of Socialism, 555

[27] https://www.cnsnews.com/news/article/terence-p-jeffrey/21955000-12329000-government-employees-outnumber-manufacturing; https://www.cbpp.org/research/some-basic-facts-on-state-and-local-government-workers