Look to the 49th state for basic-income guidance

An auto dealership in Anchorage, Alaska, advertises PFD, or Permanent Fund Dividend, sales.

What do Finland, the province of Ontario, the Italian city of Livorno, the African nations of Kenya, Namibia, and Uganda, the Indian state of Madhya Pradesh, and the 49th state of the Union—Alaska—have in common? They all have in place or are about to introduce some form of guaranteed basic income for some or all of their citizens.

Earlier this month, Ontario announced the findings of 14 public consultations on how the Canadian province should develop a program to provide a basic income to every citizen. Finland in January announced a pilot to give 2,000 unemployed people about $581 per month, and the Mediterranean port city of Livorno has a program in place too. But it’s not only rich countries that are testing and evaluating basic-income programs. So, too, are Kenya, Namibia, Uganda, and the state of Madhya Pradesh in India. The United States also boasts some experience with basic-income type programs, so the concept shouldn’t be treated as all that foreign.

The idea is simple: Governments provide people with money so they have a basic income. The places that have put programs in place are doing so to address poverty. In Ontario, the goal is to “help people meet their basic needs while supporting long-term social and economic prosperity and security for everyone.” In Finland, the program supplants other social benefits, streamlining the way people are able to access public assistance.

In the United States, the policy idea of a basic income dates back to the late 1960s, when President Richard Nixon proposed the Family Assistance Plan, which would have guaranteed a family of four $1,600 per year (about $13,168 today). The plan passed the House of Representatives but ended up failing in the Senate. Since then, the idea of providing a universal basic income has popped up in both liberal and conservative economic circles.

There are new reasons today to consider a basic income. Many economists, other social scientists, and business leaders alike believe that in the not-too-distant future, robots will perform the work of perhaps half of today’s workers. This will—and indeed already is—creating economic and social problems. The evidence is that labor market dislocations may not be confined to jobs at the very bottom of the income spectrum. Even jobs such as radiologists and other technicians are being replaced by technology.

Importantly, the advances now being experienced in robotics and other technologies are not merely the genius of the individuals who get credit for the innovations. These advances are possible because of the innovations and progress of all who’ve come before them. It is humanity’s inheritance. The ones who today are reaping all the rewards are standing on the shoulders of giants. A basic-income dividend would be a way to ensure the gains from collective knowledge are shared equitably.

There also is practical experience with providing such a dividend in the United States. Just look to Alaska. After oil reserves were discovered in 1968 in Prudhoe Bay and just before the first barrel of crude passed through the Trans-Alaska Pipeline in 1977, citizens of that state decided that these reserves belonged to everyone in the state. So, in 1976 they changed their constitution to create the Alaska Permanent Fund. Each year, the fund collects 25 percent of all oil and mineral royalties earned in the state, invests in a broad range of assets—including domestic and international equities, bonds, and real estate—and every Alaskan resident living in the state receives an annual dividend from the earnings each year. It’s their collective inheritance.

U.S. policymakers could follow Alaska’s example. They could tax the wealth generated by new technology, and give a dividend to everyone in America, creating a National Technology Revolution Fund. What would be the economic effects of such a policy? Economists and policymakers do not know a lot about how Alaska’s program affects the local economy, but one study done in 1984 (after the first distribution) found that about one-third of dividend income went to savings and debt reduction. Another study, in 1989, found that most of the dividends eventually found their way into Alaska’s economy. That study estimated that the total (direct and indirect) macroeconomic effects included an additional 10,000 jobs and $1.5 billion in personal income cumulatively, between 1982 and 1988.

Learning more about the Alaska Fund’s broader economic outcomes could give U.S. policymakers real insights into whether and how providing a basic income could be a solution to an increasingly jobless future.

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