Beruflich Dokumente
Kultur Dokumente
Devin Glaser
Government Finance
Final Paper
6/11/2015
2
Introduction:
person in the country, could provide a simpler and more effective social safety net than
the disconnected programs we utilize today. While such a program would be beneficial
immediately, it will grow even more necessary as workers in the United States continue
to lose employment opportunities as jobs are lost to automation. Such a system would
A History of Displacement:
Just over 200 years ago, hundreds of displaced workers assembled in Nottingham
marketplace, located a stone’s throw from Shorewood Forest, the mythical home of
Robin Hood (O'Rourke, et al., 2013)(Conniff, 2011). They came together under the
banner of General Ludd (Linton, 1992), an invented character created to mock and terrify
factory owners who had recently laid off a number of skilled cloth workers and replaced
them with machines. The displaced workers were angry, the jobs they lost to automation
were highly paid and prestigious positions, requiring hard work and lots of skill. They
came together and attacked the factories in which they had once worked, destroying the
machines that replaced them (O'Rourke, et al., 2013) and burning down the factories of
offense (Linton, 1992), shooting workers as they attacked factories and publicly hanging
Today these protesters are called “Luddites”, and are remembered for their battles
against technology. But the Luddites were not fighting technology based on some
romanticized idea of the natural world. Instead they fought and died to guard against
automation, to protect their jobs, jobs that eventually disappeared and were never fully
The benefits of the Industrial Revolution are still felt today. Beyond cheap
clothing, consumers today have access to automobiles, airplanes and jobs that would not
have existed without machines replacing human labor. But for the Luddites, and for
“It was certainly I think in their interest to wreck machines,” said Bob Allen, a
Professor of Economic History at New York University, Abu Dhabi. “They were acting
rationally, and I think to say that they were irrational and opponents of progress and
Automation Today:
The economic boom following World War II lifted up most workers in the United
States and other industrialized countries (Hughes 2014). The machines that replaced jobs
in the early 19th century came to be the commonplace tools of production in the 20th
century. But even prior to the global recession of 2008, companies began using new
the global economy recovers from the great recession, corporate productivity and profits
are increasing while overall employment and wages stagnate or fall (Shierholz, Mishel
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2013). This structural deficiency is so large that in the “United States the employment-
to-population ratio has now declined to a thirty-five year low (Hughes 2014).”
Looking into the near future, we are likely to replace even more living-wage jobs
with automation. The adoption of self-driving trucks will replace approximately 3.5
million middle class jobs dispersed throughout mostly rural areas of the United States
(Santens 2015). The 2014 Census reported “Truck, delivery, and tractor drivers” to be
the most common occupation in 29 states (Bui 2015). The effect of this automation will
be felt in states already hurting from the loss of factory jobs. This same self-driving
technology will likely replace the 233,000 taxi and chauffeur jobs located within big
unemployment will look a lot like the unemployment that led to the Luddite movement.
But there is a simple economic solution that could prevent ragtag armies of unemployed
truck and taxi drivers from amassing in our National parks intent on destroying the
resident or citizen of a country. The same amount of money would be given to the rich
and the poor alike, and would be sufficient to cover basic necessities. This basic income
would be in addition to any money earned from other sources, combining “the income
In 2015, the poverty guideline for a single person was $11,770 (U.S. Census,
2013). While this represents a low threshold for actual subsistence, a Universal Basic
Income set at this amount would end poverty as we measure it. An even higher income
guarantee could ensure all citizens were able to afford basic necessities such as food,
The idea of a Universal Basic Income has been discussed by conservative and
creating a “negative income tax” (Frank 2006). Friedman believed in the power of the
market but not in its ability to distribute enough income to meet basic human needs.
Famed classical liberalist Freidrich Hayek wrote of creating a “minimum income for
everyone, or a sort of floor below which nobody need fall even when he is unable to
Nobel prize winning economist James Tobin supported the idea as a campaign
Luther King Jr. endorsed the idea himself, writing “I am now convinced that the simplest
approach will prove to be the most effective -- the solution to poverty is to abolish it
directly by a now widely discussed measure: the guaranteed income (King 1967).”
The world’s only current Universal Basic Income is the Alaska Permanent Fund.
The fund, in existence since 1976, provides each Alaskan with a dividend from
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investments of the state’s oil and mineral revenues. In 2008, before the great recession,
the fund paid out $2,069 to every resident of Alaska who had lived there the previous
year (Alaska Department of Revenue, 2012). That’s an extra $6,207 for a single mother
with two children. The fund was damaged by the great recession, but still paid out $900
This guaranteed income has not only helped reduce poverty, but has also lowered
income inequality. In 2012, Alaska’s poverty rate was 10.8%, the fifth lowest in the
nation (U.S. Census Bureau, n.d.). In 2013, Alaska had the lowest levels of inequality
(measured using the GINI index) of all 50 states (U.S. Census Bureau, 2014).
Unlike current assistance, benefits are not lost as an individual enters the
workforce and moves out of poverty. This eliminates a common welfare trap that occurs
when rising incomes decrease total benefits. A Universal Basic Income should lead to
higher rates of employment for those at the bottom of the earnings scale, “because they
can retain their basic income when working, their effective marginal rate of tax is
reduced, the return on their effort increases, and they are no longer trapped in poverty by
One of the most successful tools we currently have to fight poverty is the
minimum wage. The minimum wage lifts many low-skilled workers out of poverty and
boosts local economies through increased spending. At the same time, the minimum
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wage is a price floor, which has the potential to create structural unemployment
Classical economics predicts that as wages rise, more employees are willing to
work and fewer employers are willing to hire them. This can lead to a number of workers
who are unable to find employment at the current wage rate. Of course, without a
minimum wage, there is no guarantee that the equilibrium wage rate will be enough to
A Universal Basic Income set adequately high could replace the minimum wage.
Instead of requiring employers to pay a wage rate intended to keep employees out of
poverty, the government would ensure each citizen had access to a baseline income.
Without the minimum wage as a labor floor, employees and employers would be able to
bargain over wages freely. If an employee found enjoyment in a job that paid less than
the minimum wage, they would be free to take such job without violating labor laws.
they are no longer faced with the threat of starvation or homelessness if they fail to accept
an unreasonable job offer. “A basic income would give [employees] the power of
refusal, that’s essential in any economic transaction, thus beginning to correct the power
There are many ways to fund a Universal Basic Income. Scott Santens, a basic
income advocate has suggested providing every adult $12,000 and every child $4,000 a
Census data (Kids Count Data Center 2014), there were 73,585,872 children and
242,542,967 adults in the United States in the year 2013. Providing the abovementioned
basic income to each would amount to $3,204,859,092,000 or just over $3.2 trillion a
year.
programs we currently use to provide aid to the poor. Our Supplemental Nutrition
Assistance for Needy Families, and many other programs can be rolled into the Universal
Basic Income stream. (Programs that benefit from the collective buying and bargaining
power of the Federal Government, such as Medicaid or Medicare, would not be wise to
roll into the Universal Basic Income fund.) By providing the fund to every citizen or
resident of the country, the money spent on the bureaucracies necessary to manage these
programs can also be rolled into this revenue stream. These savings and consolidations
could pay for approximately $1.5 trillion of the Universal Basic Income (Santens 2015b),
Total aggregate household income in the United States was approximately $8.5
trillion dollars in 2013 (Census n.d.). Extracting and redistributing $1.7 trillion a year
from households making a total of $8.5 trillion a year may appear distortionary, but those
same households will be receiving the Universal Basic Income. While an ideal income
tax to fund the program would be leveraged solely on high-earners, even a flat 20% tax
Families making $20,000 a year would not see their taxes rise, as the additional
$4,000 they would owe in taxes would be deducted from the $12,000 they were
guaranteed, leading to a net Universal Basic Income payment of $8,000. Using this
calculation, taxpayers would not see a tax increase until their yearly income went over
$60,000. As the United States median adjusted gross income was $36,055 in 2012 (IRS
A flat income tax would be a simple means of funding a Universal Basic Income,
but there are other sources of taxation that would bring positive externalities. Nobel
Prize winning economist Joseph Stiglitz suggests taxing rent seeking behavior, a term
describing when individuals seek out favorable government policy to increase wealth
without creating it. Rent-seeking behaviors distort market efficiencies in the form of
corporate subsidies, favorable tax treatment, monopoly power, and natural resource
acquisitions at below their fair market value. As Stiglitz (2013) wrote, “Taxing work
and savings can weaken incentives; in contrast, taxing the ‘rents’ on land, oil, or natural
resources won’t make them disappear” (p. 49). Ted Halstead (1999), estimated charging
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the fair market value for the use of public assets such as “the oil and coal in the ground,
the trees in our national forests, the airwaves and the electro-magnetic spectrum and the
rights to pollute our air” could raise trillions of dollars (as cited in Butler, 2005). A tax on
pollution would help fund a Universal Basic Income while simultaneously benefiting the
environment. A carbon tax of $30 per metric ton of carbon dioxide emitted is estimated to
raise $145 billion a year in the United States (Bauman & Hsu, 2012).
Criticisms:
will remove individual’s will to work. The United States and Canada both ran
experiments in the 1960s and 1970s to determine the effect of a Universal Basic Income
on individual’s desires to work (Hum, Simpson 1993). In 1968, the New Jersey
Negative Income Tax, followed shortly thereafter by other studies in Gary, Indiana,
Seattle, Washington and Denver, Colorado (Hum, Simpson 1993). Canada followed suit
shortly thereafter with the Manitoba Basic Annual Income Experiment “Mincome”.
The only statistically significant results from the studies found that men reduced
the number of hours worked by 7-8%, married women reduced their total work hours by
22%, and single women with children by 15-16% (Hum, Simpson 1993). Families with
preschool-age children in the household saw men continue to work more hours, while
women worked less (the studies did not measure housework and child rearing as labor).
Put in the context of a 40-hour week, this means men left work less than three hours early
on a Friday, married women essentially worked one day less a week, and single mothers
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spent six hours less at the job, hardly the picture of a bunch of indolent moochers
unwilling to work.
Conclusion:
means to combat poverty, providing an income floor against destitution. Such a system
would not only be fair and easy to administer, but would provide a safety net as the
United States continues to automate away jobs previously held by humans. Funding this
Universal Basic Income would be simple and painless for many, and will not have a
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