Andrew Yang is taking UBI mainstream – what even is UBI?

Andrew Yang is a democratic candidate for the 2020 presidential election. He’s also the author of two books, a former lawyer, the Obama administration’s “Champion of Change”, and has been involved in multiple start-ups, including the non-profit Venture for America. One of his main policy proposals is the Freedom Dividend which is essentially a universal basic income, or UBI for short. UBI would help provide US citizens with a little more income each month with no strings attached. At first blush this may seem crazy, but it is an idea championed by the technology sector as a reasonable and healthy outcome of the information revolution currently eliminating millions of jobs every year.

The funding to make UBI work would stem from a Value Added Tax (VAT). Yang is competing with the other candidates such as Joe Biden and Bernie Sanders. Andrew will be in Philadelphia Tuesday, September 17th to help rally support going into debate season. UBI is a concept that has been around for years but has been gaining in popular economic conversation more recently. This idea is not purely conceptual, however, and even has been in place in the state of Alaska since 1976. The state of Alaska implemented it to share the massive revenues associated with oil drilling in the Arctic Circle. In Alaska, the program is called the Permanent Fund Dividend or PFD.

https://basicincome.org/news/2018/02/alaskas-permanent-fund-dividend-no-overall-effect-employment/

What is universal basic income?

Universal Basic Income is when the government gives money directly to its citizens through taxation or profits from other sources, such as natural resources as in the case of Alaska. This is just basically giving back to the people, and Alaska is the only state in America to do this. That may be changing though. Yang wants to put a tax on major tech companies in the country such as Amazon and Google. The plan would be that every United States citizen would gain an extra $1,000 a month or $12,000 per year. This would help the economy generously and is not that much of a far-fetched idea.

Andrew Yang Speaks in New Hampshire

Why is it needed?

It is estimated that Amazon paid between 0% and 8% in federal taxes last year, with some estimates suggesting that Amazon’s tax burden may have been negative after rebates. Yes, you read that right, Amazon may have owed negative taxes. With this, these major companies would be helping the country as a whole and not just themselves. Let us take just these two companies, Amazon and Google, and show just how feasible and not expensive it is for these companies to do this. This past quarter, Amazon made $63.4 billion in revenue and Google made $32.6 billion. So these two companies together made a combined $96,000,000,000. These companies should have to give some money somewhere, and Yang believes UBI is the best way to do so.

It helps keep the companies in line so that they do not get too powerful. It would force them to move some of their revenue back into the people, but this can also benefit these companies, since most families would put this money toward purchases they have been putting off, or spend it on entertainment or activities they would have otherwise foregone. Odds are, this money is going right back into these companies and benefiting them. This is why you hear that companies such as Amazon are on board with this idea. It is a win-win for everyone – puts money back into people’s pockets and then goes right back into the economy to help better the production of goods in America.

What are the Hierarchy of Needs?

The Hierarchy of Needs is a psychological visualization construct created by Abraham Maslow in a 1943 paper. This visualization has been analyzed and has evolved over the years and is a staple of Psychology 101 classes taught in universities. The figure is set up in the shape of a triangle with five sections, each one progressing from the other. It begins with physiological, then moving to safety, social belonging, esteem, and finally self actualization. These levels represent the different stages of fulfillment in a human life. Andrew Yang often cites Maslow to illustrate the dire state of the US population.

Physiological

The basic physical needs to survive as a human. Examples of that are food, water, shelter, and health. Only once you have everything at that level are you able to move up to the next rung, which is safety. The idea is that if you cannot breathe, then you can’t even pause to contemplate things like long term health and happiness. People struggling to handle the basics in life cannot stop to think about politics or economic theory. If you are stuck on this tier, you probably have no idea this construct even exists.

Safety

Out of harm, you are healthy. This does not just mean physical safety, it could also mean financial. You could be safe from your bills, or you could finally have secure housing and a stable job. Relief from the anxiety of living paycheck to paycheck has immense value. This rung and the next is where most Americans spend their lives. The vast majority of the human population spends their time and energy thinking about their employment or “living.” Their health and personal property are not far behind. This tier is the core of Republican philosophy and remains a great source of strength for right wing ideals.

Social

Belonging means you are or have found your place in life with others. You could begin to make new friends or strengthen relationships with older ones. You could also begin to make a family of your own and meet new people. This stage is where you see happiness come to a focal point. People are free from the burden of survival and are enjoying life and all the things that come after you are secure.

The downside of social constructs is the notion of tribalism. Racist and nationalist ideals often originate in this tier. Maybe you went to a tailgate and yelled at a certain guy of a different race who was wearing a different team’s jersey… Fandom is an example of both the best of the social tier and sometimes the worst.

Self Esteem

You are confident in yourself and what you do in life. You feel like you are finally gaining respect from others and that your name holds weight and you aren’t just someone else. People will often do other activities to get to this stage. That may include playing sports, working out, or teaching something you are knowledgeable at. These help give you confidence and value, which are major keys in this rung of the triangle.

Modern American ideals tie self esteem to financial success, which can be debated as a healthy set of values.

Actualization

The last major stage is self-actualization, which means having reached your full potential. You have realized the impact you can make in life and are using that to the fullest and are successful at those hobbies you enjoy. This stage, people are at their happiest and there is nowhere else for them to go because they are already at the top.

This is incredibly rare, unless you are Buddah or maybe the Dali Llama. This is the goal, a goal that precious few ever attain.

Why does $1,000 change society?

$1,000 like stated above can help society in a number of ways. Let us take a family of four for example. Let’s say each parent brings in the average US income, roughly $31,000. So this family brings in $62,000 yearly and lives a normal middle class life. Sometimes going out to eat, the occasional vacation, etc. Now you throw $24,000 into the mix, and just like that, you are at $86,000 a year. This greatly changes your way of living as your income just went up about 25%.

Yang is proposing putting more money into the economy, to spend more money on actualization. Maybe you are able to get that new car, hobby, etc. Or one of the main hopes is you use your money to make money. The extra $12 grand a year might help some people with getting an entrepreneurship off the ground and running. This would help the economy greatly as it would lead to new ideas and other ways of generating revenue. It would help several other industries, as stated. Entertainment would likely see an increase, the automotive industry would see an uptick with people being able to afford new cars or parts, clothing stores would generate more revenue, and many more. The money would be taken from a few select corporations and be shared all throughout the economy, allowing other industries to grow and succeed.

Modern American social value is often defined by income levels and by the work that a person does. The concept of a UBI changes the essential value system to one that is human centered and allows people, who are so inclined, to explore creative outlets for their life. This is essential to the process of self actualization, and it is a buffer against the potentially devastating effects of automation.

Does UBI get you to higher levels?

Circling back around, Universal Basic Income could have major ties to the Hierarchy of Needs, or HON for short. Let us divide up the pyramid into three sections, Lower (Physiological and Safety), Middle (Social Belonging and Self Esteem), and Upper (Self Actualization). That $1,000 a month can greatly benefit each of these sections. For the first section, that money can be just what you need to get out of the hole you have been in financially, taking some pressure off of you and not being fully paycheck to paycheck. It can allow you to finally pay off your student loan debts, car payments, or even get your car working. Just that much extra can be such a huge change in lifestyle, and in my opinion, the $1,000 extra is probably the most important here.

For the safety rung, the money can be used to help those explore entrepreneurial ideas they have and were once seen as unstable income opportunities. Take Riley, for example. Riley has a main job as an accountant. He has always wanted to be an artist, but felt the money was not there to do it full time. Riley the accountant can now experiment with extra income, pursue his own ideas on a small scale, and see if being an artist is something he is able to do full time.

Even this experimenting helps grow the economy and provides competition among others. This dividend would be progressive in that the rich will see less benefit, by percentage. But to 99% of Americans, it empowers them to improve economic upward mobility.

Trickle Up Economy

This whole idea is seen in what is called a trickle up economy. While a trickle down sees it as the top companies wealth would benefit the economy and they would be the driving force, in a trickle up economy, they would still be the driving force, it would just be second handed. The middle class would be the ones dictating how the market grows and which industries would thrive over others. Also, they would create their own companies as stated above. The economy in recent years has not been like that, but with the rise of automation, there are major changes coming.

Ronald Reagan and modern Republican economic theory has hinged on a “trickle down” economic approach. The theory states that wealth will trickle down into the economy because rich people will buy luxury items. These luxury purchases employ middle class people, and those people will shop at Walmart to employ poor people. Like most economic theories, good in theory, flawed in practice. The income disparity in the US is due, in part, to the simple nature of wealthy people retaining wealth versus spending every dollar gained.

In Yang’s vision of a bottom up, or human-centered, capitalist system, money would flow into the hands of the poor, who will almost certainly spend that money on those items required for the basics of living according to Maslow’s hierarchy. Money flows from a broad base of population into the hands of merchants and up to suppliers and ultimately corporations. A healthy economy is defined by the alacrity of capital and goods exchanging hands.

Why Universal Basic Income needs to happen for the General Population:

While it is nice to have spending money and cash you don’t have to work for, there is another major reason as to why this is such a growing idea. We are currently in the midst of yet another industrial revolution. Automation has begun, and soon many jobs will be lost. This is not just one industry. This is affecting many factory workers, cashiers, customer service, and many others. While this will be better for goods, it will put many people out of jobs. And while they wait to change jobs or for fields to develop, UBI, alongside any potential savings, should be a small but very beneficial crutch for Americans to use until they can get back on their feet. Without this, many Americans could go homeless or be stuck in dire situations.

While $12,000 a year is not pay you can live off of, $5,000 below minimum wage, it will still help people in those situations.

Robots? 

All in all, this future of automation is coming – and very soon. People need to prepare for how the economy is going to change, and holding those companies accountable and sending some of their revenue into the people is a great way to start. There are benefits for all sides, and they are crucial within the hierarchy of needs we have made. Andrew Yang is bringing an important conversation into the mainstream.

The Ugly Truth

Many people will point out potential flaws in the Freedom Dividend. Others will laugh it off as a political gimmick. The ugly truth, however, is that labor participation rates have been falling fairly consistently since 2001 in this country. Just 62.9% of US adults participate in the US labor market. The other 37% exist primarily off of some sort of social safety net. Welfare and disability programs come with vast amounts of regulation and restrictions for those who participate. Those regulations inhibit and discourage folks on welfare or disability from re-entering the labor force by threatening a loss of benefits once income reaches a certain threshold. This traps people into a welfare system.

The Freedom Dividend, would extend the benefits to all adult Americans and eliminate those regulations. This would not only “take the boot off the neck of the average American,” as Yang has said, but it would encourage the existing social program participants to try new things and start small businesses.

Bottom Line

Even if this is a terrible idea, it may be the only viable future proof solution being proposed for 2020. And Yang’s message is resonating with many people who are not Democrats. In a recent poll by Emerson College, Yang is second only to Joe Biden in polling directly against Donald Trump. So while Yang isn’t in the mainstream of Democratic party yet, this belies the fact that his ideas are beginning to open the eyes of common independents. There is a there, there.