Money for nothing?

Opinion

Hey there, time traveller!
This article was published 06/06/2020 (1942 days ago), so information in it may no longer be current.

Money for all, or a universal basic income, may sound like a radical idea.

But the pandemic — and the immediate need for economic support for millions of Canadians — has put it suddenly in the mainstream.

That’s especially the case given the federal government’s Canada Emergency Response Benefit (CERB), providing economic aid to anyone struggling to make more than $1,000 a month, has been so widely used by those who need.

Now helping bolster the case for universal basic income (UBI) is a soon-to-be-released book by a leading economics columnist for the United Kingdom’s Financial Times.

Martin Sandbu is a London-based writer for the daily newspaper, as well as a senior research fellow at the Wharton School at University of Pennsylvania, and a postdoctoral research fellow at Columbia University.

And he recently Zoomed (videoconferenced) with the Free Press to discuss his upcoming book: The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity For All.

The timing for its release could not be more prescient in the midst of what’s transpired in recent months with the COVID-19 pandemic, spawning unprecedented economic, social and political upheaval in every part of the world.

But the current crisis is only “reinforcing the pressures and challenges that were already there, and… that the economy isn’t working for everyone, and hasn’t been for a good four decades,” he argues.

This has led to the rise of populism, anti-liberal democratic movements, and the demonization of globalization. But Sandbu notes — as many have also observed — that rising economic inequality is in large part caused by advances in technology, as opposed to simply just globalization.

Technology has dramatically increased productivity, but by definition better productivity involves fewer workers able to do more work because of innovation. This trend will only continue with machines replacing many jobs done by people.

Those with knowledge-based jobs and higher education have fared better and will likely continue to do so in the future.

“They tend to thrive, whereas those who in the past would resort to well-paid manual jobs that didn’t require a lot of education — prototypically the male factory worker — have had fewer and fewer opportunities,” he says.

“Some of that has come out in the culture wars we now see.”

While a basic income for everyone is not a fix-all, Sandbu focused on the idea in a couple of chapters, highlighting UBI as a key tool to stabilize economically the growing number of individuals working part-time and gig jobs — who are generally unable to gain financial security.

The idea is not new in Canada.

Ontario had run a pilot a few years ago. And during the 1970s, Manitoba had its own ‘Mincome’ experiment in which participants received a basic income. Critics have often called these programs disincentives to work. Why earn money, after all, when you’re already receiving money for nothing?

But Sandbu says existing programs to help low-income individuals already include disincentives to earning money because those supports are often quickly pared back when individuals earn additional income. That’s not to say UBI wouldn’t be clawed back at higher income levels. Yet he says providing a floor for the growing number of precariously employed individuals could have far more benefits than costs to governments and society.

“What’s unique about universal basic income is that the unconditional element of it allows people a degree of empowerment in the workplace and generally in their lives.”

For one, he adds, people would have more choice in their line of work, having the ability to say ‘no’ to jobs with terrible conditions.

“That’s important psychologically and morally,” he says. “It’s good for people to have that outside option.”

But it’s also good for the broader economy.

For one, it would increase worker mobility to move from one job to a better one, and even take the time to get training for emerging occupations in a shifting economic climate.

“A lot of people living hand to mouth are trapped in their situation, and people are quite good at improving their situation if they have the chance,” he says. “That’s good for overall productivity growth because it’s good if people can move to where they are used in the best possible way.”

Additionally, it would help mitigate other negative effects of precarious employment and often intractable poverty.

As Sandbu put it, bad jobs “cause stress; they cause disease.”

Of course, the question is how would governments — already running deficits — manage the cost? He argues it would not be as costly as one would think because UBI would eliminate the need for most other anti-poverty programs. As well, individuals of all economic walks of life would pay income tax, in place of the basic exemption amounts common among many industrial countries, including Canada. He also suggests a net wealth tax, similar to what U.S. Sen. Elizabeth Warren proposed when she was running for the Democratic presidential nomination. (She suggested a two per cent annual tax on net wealth more than $50 million, by the way.)

What’s more, the potential better social outcomes from UBI could lead to reduced health care and other costs, leading to additional savings for government.

While it’s easy to write off UBI as ‘too radical’ or ‘too costly’, Sandbu argues that the status quo is pushing the current system to the brink.

“And if the politics of the (2008-09) global financial crisis have been ugly, just wait for the post-COVID politics if we don’t start to change things in a more fundamental way.”