October 1, 2000
With Responses From
Oct 1, 2000
6 Min read time
Philippe Van Parijs’s proposal deserves serious consideration in the United States. A universal basic income has much to offer, particularly to women. A UBI could help fill the gaps in US social programs that leave women economically vulnerable. And the tax increase needed to fund the program poses no serious threat to the economy. The libertarian right will surely howl that "high taxes" dramatically reduce work and savings. But economic research challenges that prediction. Raising the right taxes, to fund the right programs, can render freedom and equality compatible with economic growth.
Refreshingly, Van Parijs argues the case for the UBI in terms of freedom–a value too seldom invoked in American social welfare policy. For similar reasons, Bruce Ackerman and I have proposed stakeholding–a one-time, unconditional grant to young citizens. Although stakeholding and the UBI differ in important ways, I want to focus on their shared strengths: both proposals could enhance women’s freedom and economic security by breaking the link between social-welfare benefits and paid work.1
American women face two distinctive economic risks. First, they still take primary responsibility for child-care and adjust their working lives to accommodate family needs. Second, and not coincidentally, women earn about 75 percent of what men earn. The combination of childcare and low earnings translates into lifelong economic insecurity. Although women’s rising rates of workforce participation have improved their economic prospects, the average woman’s career remains shorter, more disrupted, and less remunerative than the average man’s.
Despite these well-known facts, neither welfare nor Social Security adequately addresses women’s distinctive situation. Consider two examples. First are the single mothers. In 1998, one quarter of US families with children were headed by women. Their median income was just $22,000, even though nearly 80 percent of single mothers were in the labor force. Almost forty percent of single-mother families were poor in 1998. And welfare offers only meager support. Welfare reforms in the mid-1990s adopted the faulty premise that poor single mothers just need to "get a job." In the typical state, welfare families now face a five-year lifetime time limit, and in the meantime collect benefits of just $700 per month. The booming economy and the phase-in of time limits have cushioned the transition to the new rules. But, at best, most welfare mothers will work in low-wage jobs that pay too little to support a family.
As a second example, consider the plight of older women. In 1998, 13 percent of elderly women were poor, compared to 7 percent of elderly men. The median income of elderly men is $18,000, compared to $10,000 for elderly women. The disparity reflects women’s longer average life span, but also the residual effects of divorce, child-care responsibilities, and low earnings. The Social Security program has two serious flaws. First, benefits presume a lifelong work history, so women who interrupt paid work to rear children lose out. Second, although the program includes an extra benefit for wives, the rules work best for women in lifelong marriages with male breadwinners. The result is a notable gender gap. In 1998, women workers received less ($675 per month, on average) than male retirees ($877)–while women who claimed benefits as wives got just $400 per month.
In contrast, a UBI offers benefits without a time limit, without a work test, and without a marriage test. Even a UBI below subsistence level could make a real difference in women’s lives. In 1999, for example, the poverty line for one person was about $8,500. Consider a UBI of less than half, or $4,000. For the median single mother, that would mean an 18 percent increase in income–for the median elderly woman, a 40 percent increase.
And the UBI comes without strings, so women can choose for themselves how to spend the cash. For example, some single mothers would use the money to work harder. They might buy better food or housing, a car to get to work, or better day care. Others would trade money for time, by quitting a second job or taking a job with a shorter commute but lower pay. The UBI places that choice squarely where it belongs–with women.
The key virtue of the UBI is that it breaks the link between benefits and paid work. In contrast, fashionable reforms like the earned income tax credit (EITC) and "privatized" Social Security take the wrong direction. The EITC is more humane than welfare, supplementing low wages without a time limit. But the EITC is paid only while one works–and in proportion to wages. Those who take time off, who work part-time, or who go back to school lose some or all their benefits. Social Security is more complex, because "privatization" connotes many different reforms. But the major plans would continue or strengthen the relationship between lifetime wages and retirement benefits. Indeed, some of the proposals would provide less protection for women than Social Security now does.2 In contrast, a UBI would ensure that everyone can count on the same income floor, regardless of work history.
As Van Parijs anticipates, critics will worry that the taxes needed to fund a UBI would reduce economic growth. In response, Van Parijs rightly questions the assumption that growth should trump freedom and equality. Maximizing growth for the benefit of richer future generations should not come at the expense of justice for today.
But advocates of the UBI can also challenge the factual basis of the anti-tax critique. Higher taxes to fund the right kind of program are compatible with economic growth. First, studies suggest that most workers and savers would not change their behavior much in response to higher income taxes.3 Second, as Van Parijs emphasizes, the UBI could promote growth by freeing people to be more productive. To be sure, some would use their UBI to work shorter hours; I have just argued that this option might be particularly valuable for mothers. But others might use the UBI to take time off for education or training. Third, although income, wealth, and estate taxes redistribute most effectively from rich to poor, progressives should be open to alternative levies that produce an overall redistribution in the direction of the less well off. For example, consumption taxes and environmental taxes might appeal to a wider political coalition. These taxes look regressive if one focuses on the tax burden alone. But if combined with a UBI, they could work a net redistribution that is quite progressive.
Van Parijs offers a welcome challenge to the fixation on paid work that pervades American social welfare policy. The UBI can deliver what Van Parijs promises: real freedom for all–including women.
1 Bruce Ackerman and Anne Alstott, The Stakeholder Society (New Haven: Yale University Press, 1999). Ackerman and I propose that high-school dropouts should receive what is, in effect, a basic income. See pp. 37-39. We also propose a separate program of flat-rate citizens’ pensions, which pay a basic income to the elderly. See pp. 129-154.We discuss why we favor stakeholding over a UBI at pp. 210-216.
2 For example, current Social Security provides for a spousal benefit and mandatory annuitization of benefits; both features tend to redistribute toward women. Some privatization plans would repeal both features.
3 Econometric studies routinely find that labor supply is not highly responsive to taxation. For recent research on this issue, see the papers collected in Does Atlas Shrug?, Joel Slemrod ed., (Princeton: Princeton University Press, 2000).
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October 01, 2000
6 Min read time