Andrew Yang on which would more broadly help the most Americans: universal basic income or higher wages

Andrew Yang
Andrew Yang rides the Staten Island Ferry on February 26 in New York City.

Most progressives – really, most Americans – agree that income inequality is a tremendous problem. For over 40 years, the vast majority of profits have gone to the wealthiest 10% of the economy, and a gigantic portion of those gains have been scooped up by the wealthiest .01 percent. The $50 trillion dollars that used to go to the American working class has now been leveraged to a fraction of the population, and that disparity is now obvious to everyone.

In this case, though, identifying the problem is the easy part. A lot of very smart people have many different ideas about how to alleviate income inequality, and many of these ideas aren’t compatible with one another. So decisions will have to be made about how to get that money back in the pockets of ordinary Americans.

For Nick Hanauer, the host of the “Pitchfork Economics” podcast, the first step to address income inequality was easy. In Washington state, Hanauer became one of the leading voices in the Fight for $15, which called for a $15 minimum wage. Now that it’s been endorsed by almost every single high-profile Democratic politician, $15 seems obvious, though Forbes in 2013 characterized it as a “near insane” proposition.

In the latest episode of “Pitchfork Economics,” Hanauer describes those early days of the Fight for $15 to former presidential candidate and current New York City mayoral candidate Andrew Yang. And Yang is in agreement with Hanauer’s assessment that raising the minimum wage is good for the economy.

“Just about everything out of your mouth, I’ve always agreed with,” Yang told Hanauer. “But I think you would agree with me, particularly during this pandemic, that the extremity [of America’s income inequality] is accelerating and getting worse.”

Yang’s approach to fixing the economy

The entrepreneur and New York City mayoral candidate is perhaps the most high-profile proponent of the universal basic income (UBI), in which the government would send every American a check that they could then spend however they wish.

Andrew Yang
Andrew Yang.

“If I had a choice between something like universal basic income and a higher minimum wage, I would choose universal basic income,” Yang said. “But if I don’t get universal basic income, then I’m all for raising the minimum wage.”

“I’m on exactly the other side of that trade,” Hanauer said. “I really do believe in capitalism. I do believe that it is a great economic system – the best ever devised.” At the same time, Hanauer rejects the idea that “the whole system will come tumbling down if companies are required to pay their workers enough to live in dignity without food stamps.”

Yang told Hanauer that when he considered getting into public life, “I looked at the political possibility of changing the labor standards along the way you suggest.”

Universal basic income versus a higher minimum wage

Yang believes that the idea of a UBI is simpler and more suited to the modern world than reforming and updating the suite of labor standards instituted in the first half of the 20th century. He considers automation to be the leading problem for American workers in the 21st century, and believes that a significant portion of the American workforce will be made obsolete once technologies like self-driving cars and trucks finally mature.

If Yang’s dire prediction is correct, and millions of Americans are forced out of work and essentially considered useless to the labor force, a UBI might be better-suited to solve that crisis.

Nick Hanauer 100 list

Hanauer, however, believes that the coming wave of automation is not significantly different than the uncountable waves of automation that workers have lived through since the dawn of civilization. The invention of assembly lines, industrial farming equipment, and personal computing caused disruption in their fields that temporarily put people out of work, but all three technologies created jobs in the long run.

Hanauer believes that the real battle is to make sure that the newly created jobs pay enough that workers can afford to fully participate in the economy, because their consumer demand is what creates more jobs.

A meaningful path forward

The problem with internal debates among progressives is that there is no one right answer, and that these economic ideas are largely exclusive of each other – no politician that I know of is simultaneously calling for expanding the minimum wage and also establishing a regular series of UBI payments for all Americans.

The path forward can only be found through good-faith, informed debates like this, deliberating what action is possible, which outcomes are preferable, and who is persuadable. The debates of today are the crucibles that shape the policy of tomorrow.

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A California city gave some residents $500 per month. After a year, their unemployment rate had dropped, while the control group’s rose.

stockton basic income experiment
Lorrine Paradela, a recipient of basic income in Stockton, California, walks with Sukhi Samra, the pilot program’s executive director, on February 7, 2020.

It’s a decades-old debate: Does paying someone simply for being alive make it easier for them to find a job or discourage them from seeking work? 

One city got its answer on Wednesday: A new report evaluated a basic-income pilot in Stockton, California, that gave 125 residents $500 monthly stipends for two years. The results showed that unemployment among the recipients dropped during the program’s first year, from 12% in February 2019 to 8% in February 2020.

The experiment’s control group – residents who didn’t receive monthly stipends – saw unemployment rise from 14% to 15% during that year.

The results challenge one of the most common criticisms of universal basic income: that unconditional cash reduces the incentive for people to find jobs. 

“I remember telling people, ‘I think that $500 will allow people to work more if they choose to do so,'” Michael Tubbs, the city’s former mayor, told Insider. “And that playing out in the data – it makes me so proud.”

Tubbs launched the pilot program, officially known as the Stockton Economic Empowerment Demonstration (SEED), in February 2019. The experiment ended in January, so there’s still a year’s worth of data left to analyze, but so far, the trial seems to have been a success.

In addition to a decline in unemployment, SEED recipients also saw a rise in full-time employment, from 28% to 40% during the program’s first year. Full-time employment increased less dramatically in the control group, from 32% to 37%.

A test of basic income

Stockton basic income debit card
SEED participants received their monthly payments on a debit card.

Basic-income experiments are hard to compare, since they often evaluate different types of outcomes – such as participants’ happiness, wellbeing, life satisfaction, or unemployment. Groups enrolled in such programs also differ in size or socioeconomic status.

Still, for the most part, studies have shown that cash benefits don’t keep people from entering the workforce.

A 2018 report found that the Alaska Permanent Fund, which has been distributing cash to state residents since 1982, increased part-time work by 17%. But the cash transfers had no effect on overall employment numbers (the share of people who had jobs), according to the researchers. This might be because more people assuming part-time work for the first time, but the number of available jobs climbed.

Finland’s basic-income trial, conducted from January 2017 to December 2018, also found that employment rates between stipend recipients and those in the control group were about even. But the results were complicated by the fact that participants had to give up part of their standard conditional benefits – things like housing allowances and illness compensation – to receive their monthly stipends. 

For Stockton’s experiment, the qualifications were simple: Participants had to be adults living in a neighborhood where the median household income was the same as or lower than the city’s overall, about $46,000.

“We were the first city to do it,” Tubbs said. “We announced we were doing it before my good friend Andrew Yang even announced that he was running for president, much less talking about a universal basic income.”

Yang, a 2020 Democratic presidential candidate, made basic income a prominent part of his campaign platform, pledging to give $1,000 a month to every US citizen over 18.

‘Now we have data’

Michael Tubbs
Michael Tubbs discusses his basic income program in Stockton, California.

Tubbs said he wasn’t surprised to see unemployment decline among Stockton’s basic-income recipients. 

“The big change was how it helped me see myself,” Tomas Vargas, a SEED recipient, told The Atlantic. “It was dead positive: I am an entrepreneur, I think of business ideas, I make business choices, I want to be financially stable.” 

Tubbs has a theory for why full-time employment increased as well: Before the stipends, residents who held part-time gigs may not have been able to afford time off work to apply for full-time jobs. 

“It’s hard when you’re on the wheel to get off the wheel,” Tubbs said. “And that’s what people were saying: ‘We work part-time, we need money today, but if I had the opportunity to apply full-time, I would take it.'”

Stockton’s trial bolsters decades of research on guaranteed income, so Tubbs thinks it could help bolster a case for a national basic-income policy

“People said they wanted data,” he said. “Now we have data.”

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