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Ending poverty: can a universal basic income be a solution?

Ending poverty: can a universal basic income be a solution?

Major religious leaders have denounced growing income inequality and poverty. Pope Francis has criticized “the economy of exclusion and inequality”, and Presiding Bishop Katharine Jefferts Schori embraced the United Nations Millennium Development Goals, a set of goals that include ending poverty.

Comparing a universal basic income to vaccines, writer Scott Santens asks if a universal basic income wouldn’t cost society less in the same way that vaccines save money on treatment. The piece is one of the most popular on blogging platform Medium right now, and makes a compelling argument that poverty should be viewed as an easily-preventable illness. Santens tries to appeal to people who fret over cost by noting that many vaccines have a return on investment several magnitudes higher than their initial cost; citing a report by the Chief Public Health official in Canada, Santens notes that investing $1 in the early years of childhood provides a cost saving between $3 and $9 in future spending on the health and criminal justice system.

Santens outlines some of the costs he associates with poverty, arguing that it would be better to prevent these costs by investing in eliminating poverty through a direct distribution of money.

From the essay:

It costs real money for us to look the other way on poverty. Unlike smallpox and other diseases we can vaccinate ourselves against, the costs of poverty can be more invisible. We don’t get bills in the mail from Poverty, Inc. telling us each month how much we owe, but we still pay these bills because they are included in our many other bills.

When we pay $10,000 in taxes instead of $7,000 because of welfare and health care, that’s in large part a $3,000 poverty bill. When we pay $500 a month instead $400 on our private health insurance premiums, that’s a $100 poverty bill. When we pay $50 on a shirt instead of $45 because of theft, that’s a $5 poverty bill. When we’re taxed a percentage of our homes to pay for prisons, that’s a poverty bill. What other examples can you think of personally? What might we all be spending on poverty every day?

Do you find his argument compelling? While he ignores the moral arguments of Pope Francis and other faith leaders, do you think his mathematical argument has merit in its potential to convince people who are not moved by conscience alone?

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Rod Gillis

@ Bill Ghrist, "The principle behind the idea that payments are reduced as income is increased is addressed automatically by the tax system–people who earn more money pay more taxes."

Yep, here in Canada "universality" has been a feature of some social programs. The principle is that everyone receives the funds in order to avoid stigma, means tests, and checker board services. However, income tax is used to level the playing field for high income earners. A classic example is Canada's Old Age Security Program (OAS) which is universal in terms of payment but some of which is subject to a "claw back" at tax time depending on your bracket.
The OAS is paid to every Canadian resident in Canada at the eligible age. The claw back kicks in once your income tax return files an income of about $72,000. When it reaches about $116,000 the OAS is claw backed completely.

A guaranteed annual income is a form of universal basic income. Just to add, that the principle of universality has been under attack by the the right in Canada, including attacks by right wing think tanks.

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Bill Ghrist

I think one thing needs to be clarified here. What is being proposed by Scott Santens is not a minimum wage and it is not a payment made to those who are determined to be in poverty. It is a universal, unconditional, basic income. To quote: "The idea is to give every citizen enough money to cover their basic needs like food and shelter, no strings attached. For the U.S. to guarantee these basic needs to assure no one would live in poverty would cost about $1,000 per adult and $300 per child every month." This does not require that we have a precise definition of who is poor and who is not--everyone gets the money, just as everyone, we hope, is vaccinated against physical disease. The article estimates that this would cost nominally about $3 trillion, or "more like $1 trillion after consolidation and elimination of many existing cash-replaceable federal programs." He makes a good case that even at that level of cost the net savings exceed the cost, just as the net savings from vaccination exceed the costs.

Disturbed by the idea of giving the money to people who are not poor? How about just considering it a universal tax rebate? Among other things, this approach eliminates the problem of penalizing poor people for earning enough to get out of poverty.

But of course this is not basically about cost/benefit analysis, it is about giving all our people the opportunity to achieve their potential.

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Cynthia Katsarelis

Thank you for bringing us back to the point, Bill. It is an intriguing idea and I have no problem with it. It seems practical and would solve a lot of problems. It is hard to see it happening in the U.S., where we don't even have universal healthcare or universal child care. My guess is that if it ever happened, it would be because of a successful cost/benefit analysis. Morally, to me it's a total winner. But there are plenty of people who worship the gospel of capitalism and jobs and bootstraps, and some even use religion to justify that gospel.

I'm a creative, so I can see it, and I can see it working beautifully for the benefit of all. But there are practical issues to solve by looking at the nuts and bolts, our taxes are multi layered, federal, state, local, income, sales, property, Medicare and Social Security. One would have to figure out how those layers of needs would be funded? I'm sure that the savings would be meaningful, but somehow those layers would need to all benefit, or we would have to restructure so that we just pay one entity... We compared paycheck stubs with a dear friend in the UK with a comparable job, her taxes from her paycheck go to one entity. She pays council tax (property tax) separately, so it ends up being just two entities. That is far simpler than ours. [NOTE: her take home pay is larger than ours, I guess that can happen when your military budget isn't obscene.]

I suspect we'll progress on livable wage before getting anywhere with a universal paycheck, but I do see it as an attractive and intriguing idea.

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Bill Ghrist

Thanks Rod, the Huff Post article is useful. I do note one significant difference from what Santens proposes, which is a _Universal_ basic income, i.e. an amount that is paid to everyone regardless of other income. I like the idea of a universal income. It eliminates a level of bureaucracy needed to keep track of how much each person/family is entitled to. It eliminates or reduces the perceived stigma of receiving "welfare" or "charity." It emphasizes that this is economic "preventative medicine" similar to vaccinations that everyone receives for physical disease.

The principle behind the idea that payments are reduced as income is increased is addressed automatically by the tax system--people who earn more money pay more taxes. Adjusting the personal exemption and tax rates could effectively make the outcome fairly similar to to the system discussed in Huff Post without the complications of keeping track of who deserves how much payment.

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Rod Gillis

The Guaranteed Annual Income has been under discussion, at least up here, for decades. Here is a link to an article on the subject from Huff Post. The article begins by noting that theorists in public welfare, both left and right, have supported the idea for generations. While it is hardly a technical treatment, it is an interesting overview.

http://www.huffingtonpost.ca/noralou-roos/is-it-finally-time-for-a-_b_7967934.html

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Bill Ghrist

Unfortunately, Cynthia, I share your skepticism about the political viability of this in the U.S. right now. The thing that needs to be emphasized is that, contrary to conventional wisdom (I repeat myself here), actual experience with this sort of program demonstrates that it increases people's economic participation, as job holders and as entrepreneurs. So it is not in conflict with capitalism--it is actually compatible with capitalism in its best sense. Getting the Ayn Randians to believe that is the big hurdle.

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Cynthia Katsarelis

Now it looks like we've hit the real Achilles Heal of the Episcopal Church.

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Carolyn Peet

In order to have this conversation you will have to define "poverty" and define "livable wage". Otherwise, they're just vague concepts.

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Cynthia Katsarelis

Every city I've lived in has defined poverty for the costs of living in their city. Here in Colorado we have a policy center that has done a lot of excellent research and uses the standard of self-sufficiency rather than US federal poverty standards. It shows that the federal standards make it seem like a single parent with two children could make it on $8 dollars an hour. Meanwhile, the self-sufficiency standard makes it clear that they need $18, $24, or $29 an hour, depending upon where they are living. Denver is $24.

Colorado has defined it very well for real living here. https://bellpolicy.org/content/what-self-sufficiency

Granted, the UN defines extreme poverty as $1.25 or less per day. I don't know their standards for poverty that isn't that extreme. However, I'm not sure that these UN standards are relevant to First World living.

I think the work of defining poverty and livable wage have been done. The problem is developing the political will to achieve it.

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Cynthia Katsarelis

My dear Paul, I've been going to Haiti for 11 years. It is the poorest country in the Western Hemisphere, so I do have some grip on the differing cost of "needs" and what that looks like across the the different zones.

We all NEED shelter and it has to be reasonably close to our jobs. What do you think are the costs of shelter in New York, London, Paris, Chicago, Denver, LA, etc., vs. Port-au-Prince?

Unless we're ready to accept shanty towns built out of center block, concrete, and re-bar, located in our parks and open spaces, regardless of zoning, then shelter in the First World is going to cost a lot more than shelter in the Third World. Is that Third World shelter acceptable? I say no, but the effort to improve that seems beyond this particular discussion.

Clearly, the "universal paycheck" idea would have to be pegged to local costs of living. If you look at the link to the idea of "self-sufficiency," I believe it does a very fine job of identifying needs and does not include wants. Have a look and let us know if they've erred.

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Paul Alvernaz

Cynthia,
When you say "I’m not sure that these UN standards are relevant to First World living" you underscore one of the problems with these definitions. It implies that things we "need" in the "first world" are not needed in the third world. Our, society's, problem with differentiating between "wants" and "needs" is at the root of a lot of our economic/financial angst. I think we too often look at others who have more than we do, and we decide that we "need" more. We chase the next best thing to purchase, assuming we will find happiness in it. But instead, we find frustration and anger, because as soon as we buy it there is something better...that someone else bought...and we can't afford to upgrade.

It would be good to really define what we, as Americans, believe is the minimum standard of living we should accept. What does that look like? How much does that cost? And stop trying to give everyone what they "want" and, instead, focusing on providing what they "need."

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Rod Gillis

Actually, part of the conversation must include a discussion about the ideological component in any definition of poverty together with a measure for poverty in any given economy. Which "definition" should we use, OECD, UNICEF, or the income definition used by the American CIA? ( yes that CIA). In Canada the Conservative Harper government has prohibited its civil service arm from issuing any measure based definition for poverty, probably because of that government's ongoing efforts to stifle any evidence based policy discussion that does not conform to partisan political message.

However, your comment is on track thus wise: one can ask whether or not a wage is livable in a particular economy in terms of basic human needs such as nutritious food, safe housing, clothing, medical care, access to education and the like.

Of course, the definition game can be used to stone wall conversation and any meaningful action resulting from the same. Reminds of the guy in senior seminar who used to ask, "but how do you define 'God' " ?

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Cynthia Katsarelis

The problem of income inequality is that many of those getting very rich are not paying a livable wage to their workers. There are stories of bank tellers on Medicaid and SNAP (food assistance) for example. Walmart and fast food industries famously don't pay livable wages and yet their executives seem to reap huge incomes.

Essentially, the middle class is subsidizing the workforce on behalf of the rich. Minimum wage was supposed to be a livable wage.

Job no. 1 is to achieve livable wage. The economic boost from that would be significant. Then figure out what to do about people who seem incapable of getting and keeping work. Of course, livable wage issues will have to take in child care and health care issues.

I propose this, a progressive tax on corporations based on their economic contributions to community/nation. If they pay livable wages, a lower tax rate. If they pay less than livable wage, tax them out the wazoo.

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Philip Snyder

Cynthia,
The minimum was was NEVER intended to be a "living wage." It was intended to be a starting wage for entry level, low skilled jobs rather than a wage on which to raise a family. I doubt very much if George Soros or the Walton family or the Bass family or Bill Gates or Warren Buffet are rich today because they don't pay their employees more than minimum wage.

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Cynthia Katsarelis

Philip, what David says. Minimum wage was meant to lift families out of poverty and to stimulate the economy. I know there's a revisionist trend going around, but that's the history.

Those people you named would still be rich if they paid livable wages, but some of them don't. And when they don't pay a livable wage to full-time workers, and those workers need assistance in food, health, and perhaps housing, then the public is subsidizing the workforce of rich people.

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