SALARIES / JUL. 08, 2014
version 2, draft 2

Is a Guaranteed Minimum Income Feasible?

This year, one of the major proposals being put forward by anti-poverty activists is a government-guaranteed minimum income; a move that its proponents say will abolish poverty and save the taxpayers’ money. The initiative is gaining traction in the United States, Canada, Great Britain and elsewhere across the globe, particularly at a time when income inequality has become a growing issue.

It would work like this: the federal and state governments would eliminate a long list of social programs, such as welfare, food stamps and unemployment insurance, and instead replace them with an unconditional basic income of roughly $20,000 a year per person, whether they already work or not.

The move has been taken so seriously that Switzerland held a referendum on a policy that would guarantee every single Swiss citizen a monthly income of $2,800. The plan was overwhelmingly rejected by voters. No legislation or political agenda is expected to be brought to Capitol Hill or Parliament Hill.

Liberals and conservatives alike have supported elements of the measure: the left wants to lift millions of people out of poverty and the right favors the cost-savings and the end of red tape. Academics have also weighed in on the potential benefits and negatives of a guaranteed income: one group says it will reduce the size of government and stimulate the economy, while another says it’ll disincentivize seeking out employment opportunities and thus hurt the economy.

This isn’t the first time that such a proposal has been made. In the Great White North, the Canadian and Manitoba governments experimented on a guaranteed minimum income. The town of Dauphin, Manitoba was the subject of a pilot program that provided each resident with a guaranteed minimum income from 1974 to 1978. It was discovered that overall health of participants improved and hospital rates declined.

Essentially, according to officials at the time, the $17 million project was a success. This has caused numerous Canadian representatives to support the measure because it can reduce the cost of government substantially, whether it’s related healthcare or social services.

In the U.S. during the 1970s, renowned economists Milton Friedman and Friedrich Hayek also conjured up similar concepts: Friedman suggested a negative income tax – he admitted it was a terrible idea but a less-bad solution to the current welfare system – and Hayek supported a minimum income floor for every adult.

Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, published an article in February entitled “Time for a Guaranteed Income?” that outlined the pros and cons, but overall de Rugy is somewhat skeptical. She wrote:

“But my main objection to a guaranteed minimum income is rooted in the wisdom of public choice: The poor structure of government incentives ensures that good intentions and elegant theories rarely equal expected results in public policy,” wrote de Rugy. “The biggest risk in implementing a guaranteed income is that it won’t completely-or even partly-replace existing welfare programs, but instead simply add a new layer of spending on top of the old.”

For T.M. Scanlon, a Harvard philosopher, a universal basic income may not even solve the matter of income inequality. He averred that ending each anti-poverty measure and transferring those funds to a guaranteed minimum income would perhaps enhance income inequality unless there is a heavy tax applied to it.

Others think it may lead to families squandering the money. What if someone receives $20,000 and places it all on red at the casino? Of course, for critics, it all leads back to the initial moral concerns: shouldn’t individuals be earning their own living to survive and making ends meet as opposed to depending on a government check each month?

In the end, no matter how one describes the initiative, a person is given this money just for breathing.

What do you think of the government-guaranteed minimum income? Let us know in the comment section.

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