The U.S. Could Help Solve Its Poverty Problem with a Universal Basic Income (2024)

The U.S. Could Help Solve Its Poverty Problem with a Universal Basic Income

A universal basic income wouldn’tlead to adults leaving their jobs and could lift millions of children into a brighter future

By Michael W. Howard

When the child tax credit, first established in 1997, was expanded for a year in 2021, it was a major political and social win for the country. At a time when the pandemic had worsened many families’ financial distress, the Biden administration’s decision not only added to the amount of the tax credit and converted the payment from a year-end lump sum to monthly payments; it also abandoned the work requirement for parents. This immediately affected one third of all children in the U.S., including 52 percent of Black children and 41 percent of Hispanic children, whose families were formerly excluded because the parents earned too little to qualify for the tax credit. The tax credit expansion lifted3.7 million children out of poverty by December 2021 without significantly reducing parents’ work participation.

Then in January 2022, the expanded tax credit expired, which plunged 3.7 million back into poverty, with higher percentage increases in poverty among Hispanic and Black children. The credit showed us that cash assistance could help families stay afloat and, contrary to some political beliefs, parents would not leave the labor system because of it. Even so, the failure to renew the expansion should not negate this important political milestone: Congress came within one vote of abandoning parental work requirements as a condition to get cash assistance for their families.

The child tax credit expansion is one step toward a universal basic income that could eliminate poverty without increasing unemployment. There are 37.9 million people in poverty in the U.S., according to 2021 Census Bureau figures. Providing a government-funded monthly payment to every individual would broadly lift them out of poverty, while providing millions of children a better chance at a good education, improved health and higher future earnings. With 11.6 percent of people in the U.S. living at or under the poverty line, this payment would benefit millions and save hundreds of billions of dollars by reducing the social costs of poverty. The question becomes: Can we convince our elected officials that poverty is not a moral failing, but a social condition that can be addressed by establishing an income floor below which no one falls?

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A universal basic income, or UBI, is defined as “a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement,” according to the Basic Income Earth Network. The child tax credit isn’t quite the same, because it is only for families with children; it also phases out at higher income levels and essentially still forces people to prove they are “poor enough” to need help—a means test. A more ambitious billapproaching the idea of UBI introduced by Representatives Rashida Tlaib and Mondaire Jones, would eliminate the means test, thereby creating a universal child allowance. Universal benefits have several advantages over means-tested benefits. They avoid divisions between “us” and “them,” removing the stigma associated with targeted benefits. Uptake by the needy, a persistent problem with targeted benefits, is improved when stigma and bureaucratic hurdles are removed. Universal benefitstend to be more popular and hence are more politically secure and better funded. And universal benefits, dispensing with means testing, are easier to administer. The universal child allowance would enroll all children at birth so no child would be excluded.

No country has yet introduced a universal basic income sufficient for essential needs. But in the U.S., Alaska has enacted its Permanent Fund Dividend, which is an annual cash payment, averaging around $1,600, that goes to every resident without means test or work requirement. It contributes to poverty reduction and has no negative effect on people’s willingness to work.

In the U.S., a universal child allowance and Social Security for seniors would mean that the two most vulnerable age groups in our population would have near-universal and unconditional income guaranteed. But of course, extending a basic income to the remaining adults faces serious hurdles. First, no one expects children under the age of 18 to work, and keeping them in poverty is costly for everyone; according to one estimate, social benefits outweigh fiscal costs of universal child allowance by 8 to 1. But there is a widely held expectation that able-bodied adults should work for their income. Empirical evidence from the means-tested minimum income experiments of the 1970s in the U.S. and recent analysis of a similar experiment in Manitoba, among other research, support the idea that few people actually stop working when they are simultaneously receiving a guaranteed income. Such research also shows that those who stop working for wages do so for good reasons, such as finishing high school or taking care of young children, and that a modest guaranteed minimum income can enable people to work who otherwise could not. Even if a few people would take the cash without contributing to society, the benefits may substantially outweigh the costs.

The norm that every abled person receiving cash payments should be seeking a job can also be challenged. First, holding a job is not the only form of work. Taking care of children and elders is work—work that is performed mostly by women without compensation. A basic income is a way of supporting and recognizing that work without intrusive state monitoring and reinforcement of gendered division of labor.

Second, research by Belgian political theorists Philippe Van Parijs and Yannick Vanderborght reveals that a significant part of individual income, or the lack of income, results not from labor but rather from luck. This is obvious in the case of income from inherited wealth, but no less true of income connected to jobs in capital-intensive industries or income involving inherited knowledge and technology. On the negative side, many people with unrecognized disabilities fall between the cracks of targeted cash transfer systems. A basic income is one way to equalize such morally arbitrary luck. Universal basic income does not give people something for nothing so much as equalize everyone’s share of the luck. Fair giving and taking would then take place on the basis of a more equitable starting place.

In addition to the belief that people will quit their jobs under a basic income, the idea faces another hurdle: apparent cost. A basic income of $1,000/month for every person in the U.S. would have a gross cost of about $4 trillion a year. A means-tested minimum income guarantee, which phases out as earned income increases above a threshold, could raise incomes by the same amount for perhaps one sixth of the gross cost of a basic income. However, the net cost to the taxpayers is no greater for basic income than for a means-tested minimum income, because the higher taxes some will pay are offset by the basic income they receive.

To the extent that the mere fact of “churning”—money going out to everyone, only to be taken back in taxes from some—is an obstacle to political support, the means-tested guaranteed income may be the more politically feasible policy, but it would lose some of the advantages of universal programs.

In the meantime, if a truly universal child allowance is eventually adopted, that could tip the scale in favor of a basic income further down the road.

This is an opinion and analysis article, and the views expressed by the author or authors are not necessarily those ofScientific American.

A version of this article with the title “Universal Basic Income Evidence” was adapted for inclusion in the April 2023 issue of Scientific American.