By: Solomon Berry
As the United States has been rocked with the Covid-19 crisis, many citizens have struggled to keep their jobs, pay their rent, and support their families. The financial crisis caused by Covid-19 illustrates the immense life-style gap in the US between the top 10% versus the bottom 10%. While many lower-income individuals are fighting to survive, the top percent continue to live largely unaffected, oblivious to the plight of others.
When discussing how to address the inequality and opportunity gap in the US, most people focus on a variety of existing social-welfare programs. However, this fractured approach to welfare programs has failed to solve these issues as a whole and should be left behind. Implementing a universal basic income (UBI) is not only feasible but could help alleviate income inequality, address the cause of the opportunity gap, and insulate the economy against crises like Covid-19.
Teaching about UBI enables the rising political generation to consider it as an alternative to current approaches to welfare programs, such as food stamps and housing assistance.
Economic Feasibility
The first issue that opponents raise when discussing UBI is cost. According to Drew Riedl, “To eliminate poverty, annual UBI payments would be $12,490 per adult, and $4,420 per child.”[1] This breakdown combined with the 250 million adults, 74 million children, and other administrative costs comes out to roughly 4 trillion dollars per year.[2] To many, this price might seem exorbitant, but the primary concern should be in how it is funded. If funding is collected from the proper channels, a universal basic income program will provide an increase in income for the average American household.
Funding a universal basic income requires multiple different approaches, as the US government’s budget is already in a deficit.[3] These approaches include the following: (1) value-added tax creating 1,500 billion dollars in revenue, (2) 60% tax bracket on income earned over a million dollars to 215 billion dollars, and (3) elimination of newly redundant welfare programs such as social security for 300 billion dollars.[4]
Many people initially shudder at the idea of implementing new taxes, but these taxes combined with a UBI are the start to alleviating the opportunity gap in the US.
Income Inequality & Equitable Opportunities
As seen in the graph above, the top 1% of Americans currently own as much wealth as the bottom 90% combined. This income gap is not because the top 1% works exponentially harder, but because they were given opportunities that many in the bottom 90% were not. As the richest individuals gain wealth, they pass it on to their children who can go to whichever college they want, study whatever they want, and work wherever they want when they graduate.
On the other side of the economic spectrum, many people do not have access to higher education. As shown in the map above, regardless of what state someone lives in, they would need to make at least double the federal minimum wage to afford housing. Minimum wage workers’ struggles have steadily worsened, as minimum wage has not increased since 2009, and inflation has steadily increased.[7] As lower-income households struggle to find affordable housing and pay for other necessities, they are increasingly shut out from the opportunities that wealthier families enjoy.
A UBI addresses opportunity gaps by taking the survival burden out of the equation of life. “Those working will be doing so because they want to rather than needing to. Although there could be greater substitution in the low-wage sector, it still has to be assumed that a need for some labor will continue.”[8] A UBI gives workers the financial freedom to further their education, find a new job, or choose their current job. These opportunities lower demand for minimum wage jobs, meaning large corporations must increase wages to maintain their labor force. Implementing a UBI causes an improvement spiral that decreases both income inequality and the opportunity gap.
Crisis Preparation
The crisis caused by the Covid-19 pandemic resulted in many people losing their jobs or being forced to work less hours. For those dependent on the minimum wage, garnering work hours is essential, so the pandemic hit them especially hard. To address the needs of these individuals, the US decided to issue stimulus checks in 2020.[9] These stimulus checks are an example of what a universal basic income would look like. Government surveys have shown that most citizens have used their stimulus checks or plan to do so. Of those using their checks, almost 80% used them to help pay rent and buy food.[10] By implementing a full version of a universal basic income, citizens would be much better equipped to handle and carry out an economic shutdown at a moment’s notice.[11]
Conclusion
The US wealthy have more than they could ever need, while others work multiple jobs just to cover the bare necessities of life. As the country continues to weather the pandemic, learn more about universal basic income and the possibilities it offers.[12]
Notes
[1] Drew Riedl, “Financing Universal Basic Income: Eliminating Poverty and Bolstering the Middle Class while Addressing Inequality, Economic Rents, and Climate Change,” Basic Income Studies, 15, no. 2 (2020), http://dx.doi.org.erl.lib.byu.edu/10.1515/bis-2020-0013.
[2] Riedl, “Financing Universal Basic Income.”
[3] Kimberly Amadeo, “US Federal Budget Breakdown,” The Balance, 2020, https://www.thebalance.com/u-s-federal-budget-breakdown-3305789#:~:text=President%20Donald%20Trump%20released%20a,1%2C%202020%2C%20through%20Sept.
[4] Riedl, “Financing Universal Basic Income.”
[5] Statista Research Department, “Distribution of Wealth in the U.S. 2020.” Statista, 2021, https://www.statista.com/statistics/299460/distribution-of-wealth-in-the-united-states/#:~:text=In%20the%20third%20quarter%20of,figure%20stood%20at%2060.5%20percent.
[6] Alicia Adamczyk, “Minimum Wage Workers Cannot Afford Rent in Any U.S. State,” CNBC, 2020, https://www.cnbc.com/2020/07/14/minimum-wage-workers-cannot-afford-rent-in-any-us-state.html.
[7] David Cooper, Elise Gould, and Ben Zipperer, “Low-Wage Workers Are Suffering from a Decline in the Real Value of the Federal Minimum Wage,” Economic Policy Institute, 2019, https://www.epi.org/publication/labor-day-2019-minimum-wage/.
[8] Oren M. Levin-Waldman, “The Inevitability of a Universal Basic Income,” Challenge, 61, no. 2 (2018): 133–55.
[9] Alicia Adamczyk, “The First Coronavirus Stimulus Checks Were Deposited This Week—Here’s When You Can Expect Yours,” CNBC, 2021, https://www.cnbc.com/2020/04/13/first-coronavirus-stimulus-checks-deposited.html.
[10] Daniel Perez-Lopez and Charles Adam Bee, “How Are Americans Using Their Stimulus Payments? Majority Who Received Stimulus Payments Spending Most of It on Household Expenses,” The United States Census Bureau, 2020, https://www.census.gov/library/stories/2020/06/how-are-americans-using-their-stimulus-payments.html.
[11] Rajiv Prabhakar, “Universal Basic Income and Covid‐19,” IPPR Progressive Review, 27, no. 1, (2020): 105–13, http://dx.doi.org.erl.lib.byu.edu/10.1111/newe.12198.
[12] Sarah Holder and Olivia Rockeman, “What Andrew Yang’s UBI Proposal Would Mean for NYC,” Bloomberg.com, 2021, https://www.bloomberg.com/news/articles/2021-01-28/what-s-in-andrew-yang-s-ubi-proposal-for-nyc.