The latest jobs report from the BLS reports a sudden acceleration of an ongoing trend of job growth, and unemployment in the US is now around 3.7 percent. Despite these impressive job numbers, real wages remain low for American workers. Perhaps in light of this, The U.S. House of Representatives passed the Raise the Wage Act this week, which reflects the goal of the Fight for $15 campaign: increase the federal minimum wage from $7.25 to $15 an hour.
The idea polls well. A majority of voters support raising the federal minimum wage to $15 per hour as well. And most 2020 Democratic presidential candidates, including Joe Biden, Elizabeth Warren, and Bernie Sanders, support a $15 federal minimum wage too.
And it may seem that conditions are perfect for changing the federal minimum wage — unemployment is low, and the idea has a lot of support. But it’s worth thinking about proposals for a $15 federal minimum wage not only in light of Americans’ current economic circumstances but also in light of projected changes to the workforce going forward.
A higher minimum wage may benefit people who have jobs, but it doesn’t make life easier for people who aren’t workers. This is what makes the idea of a Universal Basic Income or Negative Income Tax a more promising route. Essentially, if we are interested in helping those most in need, we should focus on policies that put cash in all people’s pockets instead of just the pockets of hourly employees.
Ultimately, the advantage of these programs over a $15 minimum wage is that they benefit all citizens and do not disproportionately benefit workers and burden employers. And unlike other costly redistributive policies such as student loan forgiveness and universal healthcare, UBI is better suited to reflect each person’s distinctive circumstances, preferences, and personal values. Below, I outline several reasons why more people should consider the UBI as a viable public policy.
Considering the UBI over the Fight for $15
Overall, the UBI does not rely on maintaining our current economic order in the way that policies that focus on benefiting workers do. This is an advantage because the economy is very likely going to change radically in the next century. Though today’s workers are not very concerned about automation, economists and policy experts argue that they should be.
Even if new technology does not cause significant job losses, workplace transformations associated with new technology are likely to have significant political and economic consequences. Tying the provision of public benefits to participation in the workforce needlessly raises the stakes of any policy that could change the composition of the workforce, and therefore increases the political and economic risks associated with automation. Moreover, the UBI doesn’t limit its benefits to people who are engaged in paid employment. This has four benefits that a higher minimum wage does not.
First, a UBI would benefit people who do valuable unpaid labor, such as childcare and eldercare, as well as people who are employees.
Second, a UBI would not interfere with workers’ and employers’ freedom to set the terms and conditions of their labor. If it is possible to benefit low-income Americans without restricting their freedom to negotiate the terms and conditions of their employment relationships, officials should favor the less restrictive policies.
Third, a UBI would not tie people to their employers. This means that a basic income would potentially enable more economic mobility, enhance workers’ bargaining power, and enable people to stop working if they need to leave the workforce due to disability or caregiving obligations.
Fourth, policies that do not tie assistance to employment would not disproportionately burden employers. The debate over minimum wage increases is often framed as if employers are failing to benefit workers sufficiently. But low-wage work often helps low-skill workers more than anyone else. Without these employment opportunities, they would be even less capable of meeting their basic needs. If the justification for a higher minimum wage is that everyone should be able to support themselves, why should employers bear the full cost of meeting that goal? In contrast, a basic income enables citizens to share the cost of supporting a social safety net rather than treating employers as the only way to achieve it.
Asignificant benefit of a UBI, in contrast to other recent entitlement reforms such as student loan forgiveness and universal healthcare, is that it doesn’t tell people how to spend it. People have different values, but in-kind benefits assume that all people have the same interest in healthcare or being debt-free. This may be broadly true, but there are tradeoffs. Given the cost of these programs, it’s fair to ask whether people would be better off if we just gave them the money instead. But evidence from developing countries suggests that cash does help people better than alternatives.
As I see it, the main challenge to a Basic Income proposal is affordability. Estimates vary, and some argue that a UBI would be catastrophically expensive whereas others suggest that it is “easily affordable.” Plausibly, while a UBI would save on administrative costs, it does seem that funding sustainable UBI could require making some hard choices about other social programs such as healthcare, education, and defense.
The UBI and Social Security
UBI may seem like a radical idea, but there’s a precedent for it in America. Elderly people already receive what is effectively a basic income through Social Security. Some of them continue to work, while others use their basic income (and retirement savings) to pay their bills so that they can focus on spending time with loved ones or pursuing new hobbies. Some elderly people are disabled, and Social Security enables them to leave the workforce.
Yet older voters consistently oppose Universal Basic Income proposals while younger voters are in favor of it. Even more curiously, older voters consistently oppose cuts to their basic income, Social Security. The difficult position for older voters is that the reasons for opposing a basic income are also reasons to oppose social security. And those who support Social Security should support a basic income as well. Those who oppose the UBI should rethink their support for Social Security. If anything, the case for a UBI is stronger than the case for Social Security because as it is currently structured, Social Security may be a slightly regressive policy, in part because wealthy people live longer.
Elsewhere, I have argued in favor of a basic income because it is a kind of compensation for the injustices associated with our existing property system. In contrast, minimum wage requirements only compound the injustices of the current system by doubling down on the idea that elevates paid employment over other kinds of potentially valuable work, discourages opportunities for low-skilled workers, and leaves non-workers out of the social safety net. A basic income is more respectful of people’s freedom, more sensitive to recipients’ values, and better suited for a rapidly changing economy.
CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.