The Case For A Universal Basic Dividend

Why full employment is not the goal

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Jul 10, 2021

Modern economic policy is built on the presumption that unemployment is bad. The idea is so widely accepted that questioning it already puts one outside the realm of respectable political debate. They may each have a different vision for how to get there, but Barack Obama, Donald Trump, Alexandria Ocasio-Cortez, and Rand Paul all agree that minimizing unemployment is desirable. But what if it isn’t?

In his wonderfully optimistic 1930 essay, “Economic Possibilities for Our Grandchildren,” renowned British economist John Maynard Keynes predicted that at the current rate of technological advancement, we’d have a 15-hour work week by the beginning of the 21st century. In his words, “For the first time since his creation man will be faced with his real, his permanent problem… how to occupy the leisure.” That obviously didn’t happen, but his logic was sound. Around half of the work people did in the 1930s has since been automated. The reason we still work 40 or more hours a week, as Anthropologist David Graeber noted in his book Bullshit Jobs, is that rather than accept the leisure technological advancement gave us, we simply made up new jobs to fill the time.

At face-value, it wouldn’t be unreasonable to assume that this isn’t a cause for alarm. Of course the nature of work evolved with new technology. But something changed between 1930 and 2021. Most of the new jobs created in the place of old industrial and agricultural work are, as Greaber described, so “pointless” and “unnecessary” that even the people working them can’t justify their existence. Just like the old tales of life in the Soviet Union, where it’s alleged their policy of full employment created situations where ten people were hired to dig a ditch that didn’t need to be dug, we’ve found ourselves in a spot where around half of UK workers work jobs they themselves describe as pointless.

As Graeber writes, pointless jobs mean people waste their lives doing useless activities and pretending to be busy. Bureaucracy skyrockets as people create irrelevant paperwork for themselves and others as that’s all they’re employed to do. People feel terrible and unworthy even when they’re paid well.

But perhaps the least quantifiable effect of this system, and the most important question of Graeber’s work is as follows: what’s the opportunity cost of maximizing employment? What isn’t done that would be done if people had the additional 25 hours a week off that Keynes predicted we would have by now. Or as Graeber asks, what if people weren’t forced into employment at all? What would we do if we were paid to do whatever we want?

That’s the promise of a Universal Basic Dividend, or UBD. Historically, UBD has been most commonly referred to as Universal Basic Income, or UBI. However, for the purpose of this article, we are going to refer to it as UBD for one main reason. The word “income” implies that the money one is earning is in exchange for work or through investments, whereas the word “dividend” does not hold such connotations. Dividend refers to a benefit from an action or policy irrespective of one's investment on the front end. Here is how we define Universal Basic Dividend:

Universal, serving all members of the population;
Basic, enough money to keep everyone above the poverty line;
Dividend, a guaranteed recurring payment with no strings attached.

At its fullest scale, the idea is to give everyone, regardless of their income or wealth, enough money to live a dignified life. What they do with that money is completely up to them. On a smaller scale, it’s been done before. And the results were promising.

David Graeber

In 1968 five leading economists—John Kenneth Galbraith, Harold Watts, James Tobin, Paul Samuelson, and Robert Lampman—published an open letter to Congress on the front page of the New York Times. The purpose of the letter was to advocate for a guaranteed income that would ensure that even the poorest Americans could live in decency. They wrote that the United States “will not have met its responsibility until everyone in the nation is assured an income no less than the officially recognized definition of poverty.” This view, today considered outlandish and a non-starter in political discussions, was seen in 1968 as increasingly viable, and even on the verge of practical implementation across the political spectrum.

In fact, plans to implement a basic income for Americans were already underway. In the late 1960’s the American government allocated tens of millions of dollars to a series of trials intended to assess the feasibility, affects, and cost effectiveness of a guaranteed basic income with no strings attached. These trials, the first-ever substantial social experiment on universal basic income to distinguish between a control group and an experimental group, looked at how roughly 8,500 Americans in designated cities across the country dealt with receiving free money. The study laid out three main questions to answer: (1) Would a guaranteed income result in people working less? (2) Would a guaranteed income program prove too expensive? (3) Would guaranteed income prove politically feasible? The results of the study were impressive across the board. It concluded that a guaranteed income did not result in people working less, was not too expensive, and might be politically manageable under the right conditions. The experiment worked.

This success, along with the prodding of his staff, inspired the unlikeliest of candidates by today's standards—the conservative Republican President Richard Nixon—yet to be besmirched in the Watergate scandal, to push forward the idea of a universal basic income for poor American families. His plan was to guarantee a family of four $1,600 a year, which is equivalent to a little over $11,000 today adjusting for inflation. The plan gained bipartisan support and looked likely to pass both chambers of congress. The media was even more exuberant. A poll conducted by the White House found that ninety percent of all newspapers were highly receptive to the plan. The Los Angeles Times, our local paper, pronounced that Nixon’s plan provided “a bold new blueprint” for eradicating poverty.

So why did the plan fail? Several factors led to the bill’s demise and the ultimate abandonment of UBD as a viable political idea. The first of these factors was a report issued to President Nixon the day he was set to announce his plan. The report, entitled ‘A Short History of a ‘Family Security System,’ was presented to the President by one of his closest advisers, Martin Anderson. Mr. Anderson was a staunch conservative, influenced by Ayn Randian philosophical free market ideals, and vehemently opposed the universal basic income plan. The report discussed one of the world’s first welfare systems, known as the Speenhamland system, which had existed in England in the early nineteenth century, mainly citing Karl Polanyi’s classic book The Great Transformation. In his book, Polanyi concluded that the Speenhamland system led the poor into idleness, decreased productivity, and ultimately threatened the very foundations of a market economy and capitalist way of life. At the top of the briefing Mr. Anderson placed a quotation by the writer George Santayana: “Those who cannot remember the past are condemned to repeat it.”

President Nixon was spooked. He did not dispel his plan for a guaranteed income, but he did shift his rhetoric regarding the topic. While in the beginning the bill, called the Family Assistance Plan, had stipulated unconditional payments, he now implemented a provision to ensure that anyone participating in the program was employed (all basic income beneficiaries without a job would have to register with the Department of Labor.). He began to refer to unemployment and poverty as a “choice.” Whereas he had once envisioned himself going down in history as a significant historical actor who had radically changed the way Americans interact with and address poverty, he began to doubt himself and the ideals he had originally expressed. Nixon still wanted to enact a new policy to help the American people, but he was unwilling to create a new conceptual framework devoid of the usual partisan petty discourse that would ground that dream. Nixon increasingly steeped his progressive ideas in conservative rhetoric. However, the basic income bill still had hope.

The bill passed the house with 243 votes for and 155 against. But it stalled in the Senate due to two major factors. First, the publication of the results of the basic income experiment had concluded that divorces had jumped fifty percent in Seattle, where a portion of the individuals who had received payments lived. This statistic brought up old sexist ideas in many senators who feared that a universal basic income would grant women too much freedom. The divorce statistic quickly gained national attention and overshadowed any positive press that the Seattle trial had generated. Sadly, ten years after the report was published it was discovered that the divorce statistic was a result of a mathematical error and that in reality the divorce rates had actually remained static throughout the trial period. On top of the divorce rates fiasco, Democrats in the Senate aggressively pushed for a higher basic income than was in the proposal, refusing to compromise. These two factors combined to create an environment in which the bill died on the floor and was ultimately thrown into the trash bin of history.

To add insult to injury, in the 1970s historians doing research into the Speenhamland system and the report that ultimately discredited it discovered that the original report was completely doctored. Much of the so-called “evidence” had been written before the results had been collected, let alone released. Furthermore, most of the people interviewed for the report were not even beneficiaries of the Speenhamland system. On top of all of this, the evidence was mainly provided by the local elite who would have been opposed to the program, especially the powerful clergy who viewed the poor as lazy and immoral. If not for the exploits of Mr. Anderson, the flawed Speenhamland report, the Democrats' stubbornness, and a small mathematical error, the course of history could have been forever altered. It is ironic that at a time when UBD was on the rise and seemed politically viable, under a conservative government, it was a 150 year old report that ultimately led to the proposals demise.

Across the border in Canada, during roughly the same period in the 1970s, the government decided to test the concept of UBD. The experiment was to be conducted in a small city just outside of Winnipeg called Dauphin, and was named the "Manitoba Basic Annual Income Experiment” or “Mincome.” The Mincome trial was one of the largest such experiments ever conducted and employed sociologists, economists, and anthropologists to determine how the residents of Dauphin reacted to free money at home, in education, at work, and in terms of their overall health. The experiment ran smoothly and a large amount of data was collected on everything from work habits to educational choices. However, after four years of data collection a new conservative government rose to power in Canada and quickly decided to nix the costly experiment.

Overnight four years of hard work and meticulous research was swept under the rug. It was concluded that there was not enough money to analyze all the data and answer any of the fundamental questions on the feasibility of a UBD. The results were packed up in 1,800 boxes and hidden away. Luckily, researchers have uncovered these long lost boxes and read through all the data, taking the time to compile results and answer the question of whether the Mincome experiment actually worked. The results could not be more impressive: in the four years that the experiment took place, school completion went up, hospital visits went down, domestic violence went down, and the amount of time people spent at work went down thirteen percent. These results show that a UBD could be hugely beneficial for our family and personal lives, if only we had the courage to consider it as a feasible political option and not some fringe idea.

But why not just give the money to the poorest people? There are pragmatic reasons for giving the dividend to everyone. The first is that bureaucracy sucks and makes everything worse. One of the reasons welfare in the United States is so ineffective is that instead of creating a universal safety net, we have hundreds of obscure means-tested programs that are so hidden and hard to apply for that those who qualify either don’t know about their existence or deem the hours of paperwork required to get assistance not worth the often meager benefits. Even in the cases where the benefits are substantial, those in need don’t know about them. When you have literally thousands of small programs with tiny individual budgets, it’s impossible (and a waste) to spend the required money on advertising to get the people who qualify aware of their existence.

Bureaucracy may seem abstract, but it is real and incredibly cumbersome. Means testing requires hiring people to create paperwork, then getting more people to check that paperwork, people to quantify the effectiveness of the paperwork, people to supervise the people creating, checking, and quantifying the paperwork, people to help find the building for the people managing, creating, checking, and quantifying the paperwork, people to clean the building, people to feed all those other people, and the list goes on. Then people have to actually fill out the paperwork, where they’re confronted by a system that slowly scrutinizes their finances by people who are paid to ensure that the government doesn’t waste any money. But how much money and time would be saved by not means-testing, by making a solution universal?

The other benefit of UBD is that it (perhaps paradoxically) actually decreases state and corporate power. The first reason is small, but not insignificant. By allowing people to spend money themselves, they get to decide what will help them the most. If you just create a program that subsidizes specific food for people in a certain income bracket, like we sort of do with food stamps, the government and corporations get to decide not only what food poor people eat, but that they have to choose to spend their money on that food. But with UBD, individuals are empowered to choose where their money is best spent. For some, they might need help with food, for others, staying healthy means getting more rest, working, and eating less. UBD, especially when it covers a basic cost of living, allows people to choose their own best practices. It is a huge step towards real, decentralized power. According to a study which synthesized the results of 165 studies containing data on 30 countries and 56 different cash transfer programs, monetary poverty is all but eliminated by cash transfer payments as we can see in the graph below.

By giving everyone enough money to live, you free people to take risks, knowing that they won’t be ruined if they fail. Think of all the innovations that we have missed out on because the people that are smart and capable of creating them are stuck working jobs that they hate. And even if these people don’t go and create something, think of all the collective suffering that is allowed to go on for no reason. Overworking is not just killing us, it’s contributing to climate change. All of these bullshit industries and the vast bureaucracies created to sustain them require people to commute and consume where they would otherwise not. In fact, studies have shown that working less would be an incredibly meaningful way to address the climate crisis. There is no inherent value in work for its own sake; work is only meaningful when it's done freely and purposely.

And no, giving people money does not make them lazy (though there is a case for laziness as well). As Dutch historian Rutger Bregman points out: “We tend to presume that the poor are unable to handle money. If they had any, people reason, they would probably spend it on fast food and cheap beer, not on fruit or education. This kind of reasoning nourishes the myriad social programs, administrative jungles, armies of program coordinators and legions of supervising staff that make up the modern welfare state.” However, this line of reasoning is not supported by the evidence. A lack of money is not directly correlated with a lack of morals or character, as many politicians would have you believe. A need for cash is simply that: a lack of access to money.

Paying for UBD can be done in a variety of different ways. Milton Friedman believed in a negative income tax. Perhaps the best way would be a mix of monetary policy reform and taxation, which we’ve written about before. The program could lead to inflation, but that inflation could be offset by reducing the unnecessary inflation banks create in our current system. The policy can undoubtedly be paid for sustainably. It’s a mainly political question, the economics are far less contentious.

The crux of UBD is the belief that we should collectively seek to minimize suffering and drudgery. We can, and have already, automated away much of the hard labor that needs to be done, so all we need to do is enjoy the time off we and our ancestors have earned. Some of us will use that time to work on our own projects, others will spend time with their family and friends, others will work to make more money so that they can have a more luxurious lifestyle. But it doesn’t matter, it’s up to them. Everyone from free-market capitalist Milton Freidman to anarcho-communist David Graeber agreed when it came to UBD, precisely because it frees people to live their best lives.

Implementing a UBD available to every person unconditionally will empower people to choose what to do with the money themselves, thus destigmatizing government assistance and eliminating welfare traps. It would cushion technological unemployment and provide a safety net for people that lack the skills to thrive in the volatile 21st century job market. A UBD would do all this while simultaneously reducing administrative overhead and unneeded bureaucracy which hoards precious time and resources. This in turn would discourage meaningless work and bullshit jobs resulting in more time for individuals’ participation in the arts and healthy activities (sports, being outdoors, eating healthier, etc.), as well as promoting socializing with family and friends. In sum, Universal Basic Dividends would reform the landscape of monetary poverty and keep everyone over the poverty line while creating a happier populace with more free time and energy.

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