Tag: poverty

Amazon Scraps Plan For New York City Headquarters

Nate Galt | United States

Amazon has just shockingly announced that it has pulled out of a deal that would move its second headquarters to Long Island City, opposite Manhattan on the East River. It has finally canceled the awaited move due to pressure from community activists and notable politicians, namely from Representative Alexandria Ocasio-Cortez (D-NY) and Senator Kirsten Gillibrand (D-NY). After the cancellation of the deal was announced, Congresswoman Ocasio-Cortez claimed victory for New York’s workers. She took to Twitter to proclaim a win against corporate greed, saying, “Anything is possible: today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world.”

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Universal Basic Income: Ultimately Botched and Inept

By TJ Roberts | United States

The concept of a Universal Basic Income (UBI) comes up as a potential alternative to the modern welfare state. What people don’t consider, however, are the consequences of such a system. A UBI is a system in which the state provides a certain income for all people within the polity. Also known as a Negative Income Tax, a UBI requires a heavily progressive form of taxation. All adults within a polity receive this payment regardless of their wealth and their employment status.

Many proponents see UBI as a means of securing people’s basic needs. In addition, they see this as far more efficient than the current system. This, according to a UBI proponent, alters the incentives toward a more productive incentive structure in the economy. Finally, advocates of a UBI claim that it allows for people to survive after automation eliminates the job market. While on the face level, these arguments all seem to have a point, but some basic economic analysis can show that UBI is fundamentally flawed. This article will first outline the arguments one may find in favor of a UBI. It will then refute the arguments. In addition, it will offer some other problems to a UBI.

Why People Support UBI

People support UBI for many reasons. The most frequent reason that people cite is that it guarantees people a certain quality of life. To these advocates, not all individuals are capable of finding employment, so society must provide for these individuals. In addition to the unemployed, a UBI is claimed to help the underemployed. In essence, a UBI is a living wage for everyone.

Another case that some fiscal conservatives and libertarians make in favor of a UBI is that it is more efficient than the current welfare state. With a UBI, there is no massive bureaucracy to determine who needs what. You receive the same living income as every other person. This drastically lowers administrative costs.

Another case that fiscal conservatives and libertarians make is that a UBI readjusts the incentive structures of society. Since everyone is guaranteed this money with no strings attached, says the UBI advocate, there is no poverty trap that encourages people to work less so that they do not lose their payments. This means that the UBI would replace all currently existing social welfare programs and would allow for commodities such as health insurance to be handled entirely by the private market.

Finally, advocates of a UBI claim that it is the only logical means of continuing human existence in the age of automation. People fear that AI and new technology will make low-level employment obsolete, and will, therefore, knock so many people out of work that they will not be able to afford to live without a UBI.

Why the UBI is Wrong

These arguments, however, all fall when one considers economic theory and empirical reality. To start, a UBI would not adequately guarantee that everyone receives an adequate quality of life. This is because a UBI would lead to overwhelming price inflation. If everyone is guaranteed a living income, then more people will be able to consume products. Because more people can afford more goods and services, businesses will be inclined to increase prices whereas this surge in the number of willing customers is an external stimulus to the economy caused by outside intervention.

If a landlord knows that their clients are now receiving a monthly check, the landlord then has an incentive to increase rent to take advantage of the new wealth. As prices rise, people become less capable of providing for themselves, so they spend less. When people spend less, businesses will decrease production, which leads to businesses having to lay off workers. These newly unemployed workers then lose the ability to spend as much as they did when they had a job. This leads to an endless cycle of increasing prices and decreasing employment.

Inflation

To add insult to injury, since the money supply is increasing, the money becomes less capable of holding value. The value of the dollar would tank under this system. This inflationary trap would compound, ending in a society in which most people are jobless, most businesses can’t afford to produce, and those who are employed have a money that is so worthless that they cannot afford anything. Such an inflationary policy overturns all the progress the market has achieved for this world.

Right now, the needs of more people are being met than ever before around the world, and no UBI caused this. Rather, it is decreasing prices that has allowed for the cost of living to drop in such a way that extreme poverty is disappearing from this world. Our World in Data illustrates this point beautifully in this slideshow. Declining prices are benefiting the worst off especially; the countries with the highest poverty rates are currently experiencing the fastest growth rates. A UBI and the inevitable price increases that follow would only harm this progress. We need more production, not redistribution.

We Cannot Afford a UBI

In terms of efficiency, while a UBI admittedly leads to cheaper administrative costs, the nominal costs make a UBI far more expensive than the status quo. Suppose the US implemented a plan that guarantees a living salary to all adults based on the cost of living in their area. According to MIT, the average living wage in the United States is $15.12 per hour. According to the US Census Bureau, there are 247,813,910 adults living in the United States. If one does the math, the cost of providing this basic income to every adult in the United States is $7,793,648,343,936 per year (this does not account for inflation and administrative costs). This is nearly $8 trillion. Given that the US spent $4.094 trillion dollars in Fiscal Year 2018, The United States would have to end every government program and more than double taxes in order to pay for this program alone.

UBI Perpetuates Poverty

While UBI may seem to eliminate the poverty trap, this is not the case. First, consider the inflationary effects of a UBI. If prices increase so dramatically that goods become unaffordable, then poverty increases. Also, the UBI does eliminate the incentive not to work that some means-tested welfare programs do have, but it also has negative incentives of its own. UBI gives businesses an incentive to slash wages.

If everyone working for a business is guaranteed a living salary, then businesses feel empowered to slash wages and keep the profits. UBI is just another form of corporate welfare. It allows for businesses to outsource the cost of having employees to the taxpayers. This makes it more likely for people to be content with what they are receiving from their guaranteed income and not pursue work at all.

In Defense of Automation

Automation is happening. But this is a good thing. Automation does not cause unemployment. Rather, it frees people to pursue other forms of work that individuals are more passionate about. The entire purpose of work is to satisfy humanity’s endless wants and needs. Since people are still poor in this world, it is clear that there are inefficiencies in the status quo. Automation allows for labor to become far more efficient. In the same way that the strides in efficiency that humanity accomplished in the industrial revolution of the 18th and 19th centuries did not eliminate the ability of regular people to find work, so too the automation revolution of the 21st century will not eliminate the need for work. Rather, it provides even more opportunities.

This is not to say that everyone will keep the jobs that they have right now. Some people will lose their jobs as automation makes the labor more efficient. But let’s consider what happens to people who lose their jobs due to automation. First of all, no one starved to death as a result of the milkman becoming obsolete in the late 20th century. People that worked as a milkman simply found other means of employment. They adapted to their times. They moved to new jobs that met consumer demand and often made these workers more prosperous

Automation Creates Jobs

But let us consider why someone would lose their job to automation. Resources are finite, but human desires are virtually unlimited. While at the face level, someone might lose their job in one area, that is because the consumer demand is being met more easily through automated processes that decrease prices and the cost of production. Automation brings prices down. This is why the cost of living has dropped so significantly that most Americans can afford something as complex as a smartphone. If people can produce more for less, prices go down.

When prices go down, consumers spend less on what they buy. When consumers spend less, they have more money. This allows for consumers to buy even more products. Since consumers can buy more, businesses have to produce more. This means that businesses need to hire more people in order to produce. Automation does not directly cause unemployment. Rather, it makes it easier for displaced workers to find new work.

Automation Creates Entrepreneurship

Another benefit of automation is that as prices go down and people become capable of affording more, people have more resources which allows them to engage in entrepreneurship. As people develop new industries (some of these industries will come directly from automation), new employees will be needed. As technology grows, the ability to acquire the means of learning new skills that improve your standing on the job market (take Skill Share as an example of this).

Automation enriches the labor force, allows for workers to find new and better jobs, allows workers to learn how to boost their resume, and brings new innovation that will create more prosperity at a lower price which especially benefits the poor. Automation does not justify a UBI. Rather, it shows why we need to avoid a UBI by any means necessary: the price increases caused by a UBI will offset the gains in human prosperity automation is causing.

How a UBI Takes Your Power Away

The greatest harm that a UBI causes is that it rips power away from the common person in the market. In a system with a UBI, people are capable of ignoring the law of supply and demand and pursue their own interests without regard for its marketability and at the detriment of those pursuing profitable work. Once again, someone has to pay for the UBI. If person X chooses to create products that they are passionate about but no one else is willing to buy, they still get the UBI and other people are forced into subsidizing their illegitimate industry.

In a truly unhampered market, person X would realize that their entrepreneurial effort is yielding no fruit and would therefore adjust their strategy to meet consumer demand. Under a UBI, the incentive to do this greatly diminishes. This is another proof that UBI is another form of corporate welfare. There is no sense in propping up industries that consumers do not want. Doing so only encourages behavior that sucks resources away from those who have an eye for what people desire. This is theft from the market and from all of us.

The Road to Hell is Paved With Good Intentions

On the surface level, Universal Basic Income comes across as an alternative to the welfare state that would make the world a more productive and prosperous place. But when one considers basic economic theory, UBI collapses under its own weight. UBI increases prices, decreases wages, and decreases productivity. This system undos the progress we have made in eliminating world poverty and causes runaway inflation that would make the current living standard unaffordable.


This article was originally published in LIFE.

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Universal Basic Income Isn’t a Challenge to the Work Ethic

Craig Axford | Canada

“Universal basic income degrades the work ethic that is at the core of working-class life,” so writes David Brooks in a recent column in the New York Times. Brooks’ statement echoes the most common attack on the universal basic income (UBI). Like other critics of the idea, he offers no evidence to support the claim.

Universal basic income won’t undermine the work ethic, but it is a threat to some of our most deeply embedded ideas about what constitutes meaningful work. With the large-scale adoption of wage labor beginning in the 19th century, we began to identify work with a paycheck. Instead of a job being a kind of work, jobs came to be seen as the only work that really mattered.

Unfortunately, by connecting ‘worthwhile’ work to a regular income we’ve devalued almost to zero many of the most important and meaningful activities within our society. The most obvious example is parenthood. Motherhood, in particular, has taken the biggest hit.

Being a Parent and Citizen

Every parent knows that raising children is difficult and exhausting work. Especially in the early years when a child is most dependent upon the adults in its life parenting can leave a mother or father with too little energy at the end of the day to do much else. Raising a child is considered a duty, and one that is supposed to be its own reward at that. No good parent, least of all a good mother, would ever suggest society should provide a minimum guaranteed level of financial security in exchange for the honor of giving birth to and raising the next generation of responsible citizens.

Yet in identifying work so strongly with a paying job, we’ve implicitly demeaned those raising our children whether we intended to or not. Work is what we do at the office, at the factory or at the retail store. Parenthood, on the other hand, is a role.

Of course, parenthood isn’t the only work we refuse to validate on the grounds it doesn’t come with a wage attached. Caregivers of all sorts often go unpaid. So do those sacrificing hours each month to help out in our schools, clean up their local park or provide countless other community services. This is justified on the grounds that volunteerism, like parenthood, should come from the heart without any expectation of a monetary reward.

Many supporters of universal basic income could reasonably argue that framing it as a kind of compensation for work our society has so far let go uncompensated is to miss the point of the policy. If an individual decided to take advantage of a monthly UBI payment and, as David Brooks and others fear, opted for sitting on the couch watching TV or playing video games all day instead of engaging in more constructive activities, they would still get their monthly check, no questions asked. UBI is about ending poverty, not making parenthood or community service pay.

While it’s true that universal basic income isn’t intended as compensation for services that society currently doesn’t pay for, at least not directly, it is none-the-less a means of making it easier to raise a family and of empowering people to engage in even more volunteerism. That doing these things is not a condition of receiving a UBI payment in no way changes the fact that determining UBI’s success would in large part rest upon shifting our focus to the kinds of worthwhile human activities that our economy currently fails to even bother to measure.

As RFK reminded us in 1968, our leading economic indicators count just about everything except what really matters. Economic security isn’t just a social justice question. It’s also about creating more space in people’s lives for the things that make life worth living.

Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans. ~ Robert Kennedy, March of 1968

Universal Basic Income and Work Ethic

Critics of universal basic income who insist that placing a floor beneath people’s feet below which they cannot sink will turn them into lazy dullards must have a particularly cynical view of humanity. Otherwise, why would they claim that we are inherently uninterested in leading fulfilling lives? Why do they consistently argue that our species consists primarily of individuals who would sooner gorge themselves on junk food all day than play with their children or grandchildren, pick up a paintbrush, write a little poetry, volunteer at a local care center, or take a class at their local college if given the chance to do so?

Whatever the reasons behind their dark misanthropic assumptions regarding human nature, the evidence can’t possibly be one of them. In their review of the results of a basic income experiment conducted in Manitoba between 1974 and 1979, the economists Derek Hum and Wayne Simpson found that “the reduction in work effort was modest: about one percent for men, three percent for wives, and five percent for unmarried women.”

Of course, by “work effort” Hum and Simpson mean time spent at a paying job. But even if they had found that people spent far less time on the job and a lot more time with their families, would this really have counted as a good argument against UBI? Does time away for the office or factory necessarily translate into laziness? How we answer these questions says a great deal about our priorities.

In reality, a universal basic income would actually help those living in poverty avoid what’s known as “the employment trap”. The employment trap describes a situation that arises far too often among current welfare recipients. Frequently, the only jobs available to them are low-income entry-level positions. These typically minimum wage jobs don’t pay enough to cover rent, food, clothing and childcare expenses, but they can provide just enough money to make someone ineligible for public assistance. As a result, welfare recipients often lose more money than they gain by going back to work.

By making a return to work a requirement of its welfare program, the United States has actually turned jobs into traps rather than escape hatches for the poor. A universal basic income, on the other hand, provides assistance each month whether a person is working or not. With a full-time minimum wage job AND a basic income of roughly $1000 a month, a single mother who chooses to go back to work could increase her annual income to nearly $30,000 a year without being penalized for doing so.

A universal basic income should be something voters and politicians from across the political spectrum can get behind. From the conservative perspective, it strengthens families by empowering parents who want to do so to stay at home with a child during its formative years. From a liberal point of view, it tackles poverty directly and efficiently without the bureaucracy and stigma associated with most of our existing anti-poverty programs.

While David Brooks and other critics of UBI clearly embrace the myth that humans are inherently lazy creatures who are unwilling to do anything constructive with their lives without the cattle prod of perpetual financial insecurity at their back, that’s a false and demeaning narrative that is more suited for the Dark Ages than the 21st century. People can achieve great things under even the worst of circumstances. But they can achieve even more when things are going well for them. Poverty is no longer an inevitable part of life. It’s a societal choice. We need to stop listening to those who seem to think it’s the right one.

Follow Craig on Twitter or read him at Medium.com

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The Beast: An Anti-War Poem

Indri Schaelicke | United States

An original free-verse poem reflecting on the inhumanity of war, which the State often creates, inadvertently or otherwise.

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The Libertarian Case for a Minimum Wage Hike

Nate Galt | United States

The federal minimum wage has been a controversial issue ever since it was introduced by President Roosevelt in 1938. Proponents of raising it say that it will help job growth and reduce poverty. However, opponents believe that raising the federal minimum wage will lead to layoffs and closures of small businesses. In all, the current federal minimum wage of seven dollars and twenty-five cents per hour is not a wage that someone can afford basic necessities with. People who are paid the federal minimum wage should be able to afford things such as clothes, food, and a roof over their head.  Raising the minimum wage has been an issue adopted by “progressive” Democrats and the Green Party. 

Taxpayers are paying for the minimum wage, just indirectly. They subsidize programs such as Food Stamps while large corporations save money by not paying their workers a living wage. This is extreme inequality because that money should go to workers employed by these corporations, not into the pockets of billionaires who try to cut corners by paying their workers very low wages. 

Raising the minimum wage would help the economy. According to the Economic Policy Institute, a minimum wage increase to $10.10 an hour would make $22.1 billion flow into the economy and would create about 85,000 new jobs in three years. Further, economists from the Federal Reserve Bank of Chicago made a prediction that if the minimum wage were to rise by $1.75, household spending would increase by $48 billion in the next year.  While these are merely predictions and are imperfect, they show that household spending increases as the minimum wage is raised. This boosts the gross domestic product and spurs job growth. For example, in Snohomish County in Washington State, there were no local minimum wages higher than the state minimum of $9.47. The state then raised the minimum wage to eleven dollars per hour. The full weight of the $1.53 increase, or over 16%, was assumed by employers. Subsequently, sixteen thousand jobs were created in Snohomish County. 

Some people say that raising the minimum wage hurts small businesses. According to Think Progress, two-thirds of “low‐wage workers are not employed by small businesses, but rather by large corporations…” Also, the three largest employers of minimum wage workers are Walmart, Yum! Brands (Pizza Hut, Taco Bell, and KFC), and McDonald’s. A hike in the minimum wage will not make large corporations like Walmart shut their doors, and its workers will benefit from it. 

Another reason the minimum wage should be raised is that it is impossible to afford rent in every state if one is paid $7.25. The state with the lowest “living wage” is South Dakota at just over 14 dollars, which is nearly double the current federal minimum wage. The definition of “living wage” is the bare minimum salary one needs to be able to afford rent, basic clothing, and groceries without skipping meals or receiving aid from the federal government. People who work full-time and are paid the minimum wage cannot provide basic necessities for themselves and their family, let alone afford to pay rent. Right now, this is the case, and millions of Americans are in a dire financial situation because they live on around only fifteen thousand dollars per year if they work full time. These people receive benefits which are subsidized by taxpayers because their employers do not pay them an adequate wage. As a result, businesses are saving money while taxpayers have to pick up the burden. If people get a living wage, they do not need to rely on taxpayer-funded public assistance. Better pay would let the government cut a lot of taxpayers’ funding of the money that it currently spends on programs to help counter poverty.

Others say that if the current minimum wage were increased, the price of items would increase. However, researchers at Purdue University found that increasing the wages of fast food workers to $15 an hour would only result in a price increase of around 4 percent. 4 percent of the cost of a Big Mac is around 23 cents, which is not a significant amount of money. The workers will have their wages doubled and will be able to make ends meet. Despite the negligible increase in prices, workers would end up with more money in their pockets and would be affected positively by this positively.

Increasing the minimum wage to 15 dollars would benefit the economy. It helps boost the GDP and job growth, and it alleviates taxpayers’ burden of paying for welfare. $15 per hour will allow minimum wage workers to make ends meet and to afford housing, clothing, and food without having to rely on government programs such as food stamps. It would reduce the number of Americans living in poverty as well. All of the above benefits have no significant drawbacks, so the only logical thing to do is to support raising the minimum wage to $15 per hour to help workers, the economy, and your tax rate. Should businesses get so-called “corporate welfare” while taxpayers have to foot the bill? Even though raising the minimum wage seems like a leftist, Bernie Sanders-type policy, all libertarians should support it. Taxes, welfare, and other benefits would be cut, leaving more money in Americans’ pockets. 


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