Here is a radical notion that deserves serious attention: guarantee every adult citizen an annual income for life. This socialist-sounding plan has not exactly received a Palm Sunday reception from the mainstream political class. There are encouraging signs, however, that it will eventually reach the table of public policy, as soon as we admit that there is no magic bullet of a jobs program that will cure the cancer of income disparity.
As noted here earlier this week, our country’s employment problem is chronic and structural. It’s not about a lack of jobs; it’s about jobs that don’t pay enough to support the middle class. That’s why, according to the Federal Reserve Bank of New York, nearly half of recent college graduates are underemployed in jobs not requiring a degree and not paying much above minimum wage. A jobs program will do little to resolve this dilemma. Technology now allows companies to produce products and services with far fewer workers than in the past. Since capitalism is all about maximizing return on investment, this trend is not only unstoppable, it’s growth is a certainty.
The basic concept of a guaranteed annual income, or GAI, is simple. People would get a monthly allotment from the federal government, just like Social Security except that the payments start at 21 instead of 62. Like any public policy, the meat and the meaning of the program lie in the details. For example, some conservatives, including the American Enterprise Institute’s Charles Murray, have proposed replacing entitlements like Social Security and Medicare with a GAI starting on a citizen’s 21st birthday. Murray’s proposal, recently laid out in the Wall Street Journal, would give everyone $13,000 a year. They could earn up to $30,000 annually without a reduction in their GAI payments. That benefit would then be incrementally reduced until it reached $6,500 a year at the point of someone having an annual pay rate of $60,000 or more. Murray’s scheme would also eliminate every current social welfare program, including food stamps, housing subsidies and Medicaid, in exchange for lifetime cash payments.
As you might have guessed, the math of Murray’s plan is not all that progressive. The trade-off for a GAI, namely the elimination of every entitlement and welfare program, is a net loss for the middle class. A good counterproposal from the left might be to keep all current programs in place and give everyone making less than $60,000 a year an annual payment of, say, $30,000. And then look for middle ground. The significance of Murry’s piece in the Journal is that a leading thinker on the right acknowledged a truth still denied by most elected leaders, namely that our world has changed so much because of technology that we can no longer cling to the work ethic that has driven economic thought for the past 200 years. Wrote Murray, ”. . .it will need to be possible, within a few decades, for a life well lived in the U.S. not to involve a job as traditionally defined.”
That is precisely the lens we need to be looking through in search of a long-term solution to our employment problem. The concept of a GAI is not new. It was a popular issue in the early 1970s, supported by Democratic presidential candidate George McGovern and, to a limited extent the guy who beat him, Richard Nixon. The hurdle it could never clear was that such payments would be an incentive not to work and, therefore, an impairment to the country’s productivity. We are in a different place now. Productivity can be achieved by robots and software programs. Why not raise taxes on the billionaire investors profiting from this new paradigm and return a dividend of sorts in the form of a GAI to the folks adversely impacted by the change?
As radical as it may sound, it is not terribly different in form or substance from the ad hoc corporate socialism doled out under our current system. Existing federal welfare payments are making it possible for large corporations to employ low wage workers with no benefits. In just one example, identified by Forbes, Walmart employees receive $6.2 billion a year in federal public assistance through food stamps, Medicaid and subsidized housing. This is precisely the same policy transaction incorporated in the GAI; low-paid workers subsidized through federal funds. It’s a win for the worker, the employer and the economy.
It’s also the same concept used by Donald Trump and Mike Pence in persuading Indiana’s Carrier Corporation not to move 800 jobs to Mexico. In exchange for keeping those jobs in Indiana, Carrier got $7 million in tax credits and other incentives, another form of a government employment subsidy, and quite an expensive one at that. The epilogue of that story, by the way, shows how badly we need a comprehensive solution to this problem. Part of the agreement was that Carrier would invest another $16 million in its Indiana plant, supposedly earnest money showing its commitment to American jobs. A few days ago, company executives said a portion of that investment will be used to automate the plant so that more jobs can be eliminated.
Structural problems need structural solutions, not sloppy patchwork fixes. It’s time for policy makers to accept the fact that employment alone is no longer a sufficient engine to drive our economy. It’s also time for all of us to rethink just what it means to lead a good life, recognizing that self-worth is not tied to a paycheck. The most direct route to that destination is a guaranteed annual income.