Edit: This podcast from Econtalk on the same subject came out a day after this post (coincidence? I think not) and was a worthy listen.
Universal Basic Income (UBI) is a concept that has gained significant momentum over the past few years, and is ubiquitous enough that most people are now at least passingly familiar with the concept.
I’m here to break the news that we already have it. Social Security is effectively a UBI that is limited to the elderly (perhaps that means the “U” in UBI needs an asterisk).
According to the SSA, nine out of ten individuals over 65 receive benefits, and I’d wager a few more tenths are waiting to claim either at their FRA or at age 70. Most of the others who don’t qualify probably receive another pension.
Most UBIs have a flat payout, not a formulaic one, but if I were a gambling man, and I am, I’d bet we see flattening payouts as part of the solution to the demographic problems the Social Security system is on track to have. Benefits for high earners are already significantly lower relative to amounts paid into the system thanks to the “bend points“. It would be a natural extension to have earners over a certain amount pay in but not increase their benefit, or to change the current bend points, or both.
This would exacerbate the “problem” of social security alone not covering pre-retirement cost of living, but would allow using social security as a ‘floor’ for the standard of living that we want to allow people to live at.
And, a natural extension of not wanting Grandma living under a bridge eating mustard sandwiches is that we don’t want anyone under a bridge eating mustard sandwiches. There are a lot of subtleties in moving from Grandma to everyone — e.g., if Grandma is eating mustard sandwiches she might not have any viable way to earn an income, while someone younger might, and maybe there are a few 20 year olds who would not work if you guaranteed they did not have to live under a bridge. This is the danger of making UBI equal to the cost of rent + food + netflix. This is called retirement, and most people find it perfectly acceptable from age 65+.
So the question, then, is: Do we wish to allow everybody, if they wanted to, to retire and watch netflix all day? It would certainly make some people better off, but the costs would have to be absorbed by others.
If the answer is yes, we have a fairly easy framework to implement with, simply allowing earlier and earlier (perhaps at more and more reduced amounts) filing for social security.