We Must Replace Job with Basic Income as Our Sector’s Primary Measure

Crises reveal vulnerabilities in societies more than anything else. The outbreak of COVID-19 is already uncovering just how wrongheaded the United States has been about what it takes for people to get by each day and how what we’ve always used to measure success, having a job, is horribly flawed.

 

While our sector has gradually become better at measuring outcomes, that doesn’t really matter if we’re not measuring what matters most. It’s a failure with real-life consequences and keeps us off from doing the work that will genuinely ensure people’s basic needs are met, reduce disparities, and help get them on the Pathway to Lifelong Success.

 

I’m advocating for one primary indicator of lifelong success that all other indicators would support along each part of the pathway. Our sector needs a measure that can aggregate data and give us a real picture of whether people are at a population level making genuine progress. That measure is basic income.

 

The private sector long ago figured out that net income, the amount of revenue left after subtracting all expenses, taxes, and costs is the best measure of a company’s sustainability. Seeking to increase net income drives almost everything the private sector does. Other indicators say, lower costs, more rational spending on expenses all exist to feed into that primary indicator.

 

A measure similar to net income makes sense for our sector, too basic income. Using it would help correct the errors that flow from the primary indicator we use today, jobs which just about everyone in the United States hears about in the media and talks about when the Labor Department releases its Employment Situation Summary early each month, but that can actually matter little or even not at all. After all, simply having a job is no guarantee you can meet your basic needs. That’s made obvious in my interview with Susannah Morgan of the Oregon Food Bank that was also just released as a podcast. Susannah told me that in 2019 they served emergency food to more than 20% of the state’s population including lots of employed people.

 

Imagine, instead, seeking to increase basic income as the specific driver of almost everything we do. Other indicators say, access to food, housing, health care all would be monitored to feed into the one primary indicator, basic income, that sets a foundation for people to be on the Pathway to Lifelong Success.

 

We know that of all the things getting on and staying on the Pathway to Lifelong Success depend on, the most important is having basic needs met. There are really only three ways that can happen, as I explained in a blog post last July, Just What Are Basic Needs in the 21st Century?: the government or some nonprofit provides some or all of what we need; we earn enough to take care of them ourselves; or, in a tiny portion of cases, we inherit enough to sustain ourselves forever. In our economic system, were expected to find a way to provide them ourselves at least those that don’t come in the form of community-level services such as schools or drinking water. If the social safety net were reframed to be about meeting basic needs so everyone can get on the pathway and stay on it, we could begin to calculate basic income as the combination of wages and what the safety net provides.

 

If we began to calculate basic income this way wed be able to identify very clearly the difference between what people can provide for themselves and the gap that one would reasonably expect any civilized society to fill. Otherwise, we must acknowledge that as a society we’ve decided to accept a harsh reality: some of our people will never be able to get on and stay on the pathway and we’re not going to address our societal failure head-on.

 

In 2017, Root Cause conducted a study of economic mobility for the Boston Chamber of Commerce. We figured out what it takes to meet basic needs for a family with two children and uncovered that 59% of families in Boston overall were not earning what we called a family-sustaining wage the amount of money needed to pay for their basic food, housing, clothing, medical, and transportation needs. Not surprisingly, while this shortfall affected only 20% of white families, the figure for Latinx families was 66% and 50% for black families.

 

The lesson I take from this study is that using a people-centered indicator such as basic income will allow us to focus on actions our sector can take to make an actual difference in people’s lives. If we did that, my guess is that there would a lot of changes to the ways we approach work in the education and economic development fields.

 

It turns out it’s pretty easy for you to know what basic income (again, that could be wages plus whatever supplements those wages) people need to meet their basic needs in your community. Take a moment and go to the Living Wage Calculator developed by Dr. Amy K. Glasmeier at MIT. It can provide you with the wages in your community for families of varying sizes. And it compares your results to the national poverty wage and the minimum wage in that location and more. I guarantee that the results will blow your mind!

 

As the government grapples with the right actions to take during this national emergency, various proposals are being floated for sending people checks ranging from the White House proposal for two checks beginning in April, perhaps of $1,000 each, to calls for instituting what would effectively be a universal basic income like what Andrew Yang was advocating during his presidential campaign and I wrote about in a series of previous blogs. Had basic income already been our primary measure, imagine how much more straightforward it would be to figure out the best next steps.

 

And now for a song that speaks for itself during these uncertain times: Life is a Ride.

One thought on “We Must Replace Job with Basic Income as Our Sector’s Primary Measure

  1. Steve Tritman says:

    Andrew–I applaud the reflection you are doing. In fact, I am thrilled about it. The sector appears to have been more focused on interim goals vs end objectives. You are asking so many good questions about what it really means for the non-profit, social services sector to be truly effective in making a difference.

    The issue of basic income is interesting. As you state, a very large number of people are not earning a “family-sustaining wage” (is that the same as what others have called a “living wage”?), and that is a big problem in our society. There will always be millions of low paying, non “family-sustaining wage” jobs in such industries as hotels, restaurants and retail so, even if we can train the current workers in these industries to get better jobs, as some existing agencies currently do, others will come to fill the void and take these jobs. Which would then beg the question “have we really moved the needle?”. Therefore, there is a need to address the entire system issue head on if we are to really make a difference to our society as a whole. The question is how. You talk about one strategy, adding a safety net for those whose incomes are too low so their total comes up to a “family-sustaining wage”. If I am not mistaken, there is also another potential strategy—raising the minimum wage by a lot (to $20-$25/hr?), not just to the $15/hr that is being currently proposed by some politicians, so that it equals the “family-sustaining wage”

    First, a few comments about the safety net. If we are to get support from people across the political spectrum, which will be necessary to get the needed legislation passed, we need to consider concerns that others might have. We also need to consider the unintended consequences that might occur. Three obvious ones come to mind (and I am sure there are others):

    1. If basic income=wages + safety net, how do we make sure that people will work to the maximum of their ability instead of taking as much as they can from the safety net?
    2. If basic income is sufficient to provide a family sustaining wage, how do we ensure that people are motivated to strive for more and not become complacent?
    3. If workers can obtain enough to provide for their families, won’t the pressure they exert on companies to increase their wages be reduced since the safety net will make up for whatever gap exists? In other words, aren’t we shifting the pressure to provide more to employees from companies to the government and non-profit sector?

    I also worry about the way you are languaging the solution. Statements such as “calculate basic income as the combination of wages and what the safety net provides”…”one would reasonably expect any civilized society to fill.” sound too much like a socialist minded agenda, which might appeal to many of your readers but will invite a great deal of push back from those who are not similarly minded and who are the majority of our society. I wonder how one might language this issue in a way that a more conservative leaning person would agree that our society has a problem and invite their perspectives and language on how to address it.

    Now about the strategy of raising the minimum wage by a lot ($20-$25/hr?) so that it equals the “family-sustaining wage”. I view this as a thought experiment to start a conversation for exploration. Is something along the lines of what is being proposed here viable? Is it worth further exploring as another legitimate strategy to address the issue of bringing everyone up to a family-sustaining wage”? What are the barriers and how to overcome them? What are the unintended consequences and are there ways to address them?

    Clearly, raising the minimum wage of everyone to the “family-sustaining wage” at least addresses the challenge of enabling everyone who works full time to earn a sufficient amount to have all their basic needs met. It would not address providing a sufficient amount for those who are not able to work full time. In that case, a safety net would be needed. If a high minimum wage law was passed, the job of the non-profit, social services sector would largely be to: 1. assist people to obtain a job to work full time; 2. assist those who strive for more to obtain the training needed; and 3. assist those who can not work full time and need a safety net to obtain and use it.

    While raising the minimum wage addresses much of the problem of having everyone obtain a“family-sustaining wage”, on the flip side, there are a number of concerns. In most cases, I believe, these concerns are not an issue as shown below:

    CONCERN 1—MORE JOBS WILL BE SENT OFFSHORE WHERE THE LABOR IS LESS EXPENSIVE
    I believe the vast majority of jobs that were vulnerable to going offshore have already gone. The US, even at current wage levels, is quite a bit more expensive vs low cost countries. What blue collar jobs that are left in the US are either high paying, unionized workers which are not easy to offshore (such as at Boeing and Caterpillar in the manufacturing sector or government employees) or low paying service workers, who generally work in sectors that don’t lend themselves to going offshore (such as the restaurant, hotel and retail industries). In fact, looking at the employment in the US, according to the US Bureau of Labor Statistics (https://www.bls.gov/emp/tables/employment-by-major-industry-sector.htm), most industries that remain in the US are not vulnerable to being exported. The top 5 employment sectors in 2018, which make up 57% of all US employment, are:

    Professional and business services 13%
    Health care and social assistance 12.4%
    State and Local Government 12.2%
    Leisure and hospitality 10.2%
    Retail trade 9.8%

    Little from this group is vulnerable to export if the wages of low income jobs is increased significantly

    Furthermore, the coronavirus pandemic has highlighted concerns about supply chains with other countries. As a result, the hurdle to offshore is higher now than in the past

    This is not to imply that no jobs will be exported but rather that the number will not be that large, certainly not even close to the scale we have seen over the past 20 years.

    CONCERN 2—RAISING OUR CURRENT LOW WAGE COHORT TO A MUCH HIGHER WAGE WILL WRECK THE US ECONOMY
    In the not that distant past, a large number of blue collar workers worked in unionized manufacturing jobs, earning a middle class wage. The economy thrived in those years. In fact, having a robust, significant middle class was very good for the economy. Is there any reason the same would not hold true again if so many who are currently in the low income class were raised similarly with a significant minimum wage?

    CONCERN 3—SOME COMPANIES, THAT PAY THE HIGHER MINIMUM WAGE, WOULD BE NON COMPETITIVE VS OTHER COMPANIES THAT DON’T.
    Since all companies in the US would be required to pay the higher minimum wage, their costs would all go up similarly and none would become less competitive with other US based companies. And, since the vast majority of these jobs are not competing with lower cost countries, this is pretty much a non factor.

    CONCERN 4—COMPANIES WOULD PASS ON THIS INCREASED COST BY RAISING PRICES, MAKING THEIR OFFERINGS LESS AFFORDABLE, THUS REDUCING DEMAND.
    It is true that some existing customers would probably reduce how often they purchase. However, there would be so many more new customers who could afford to purchase for the first time. Most prior studies examined the impact of increasing the minimum wage by a dollar or two. This level is too insignificant to create many new customers (when you are not earning a “family-sustaining wage”, small increments of increased income go towards survival, not much else). A much larger increase in the minimum wage would raise people from the lower economic class to the middle class. That will create much more new demand. There is a good historical example. In the early years of the automotive industry, Henry Ford decided to pay his workers wages that were much higher than what they could earn elsewhere so they could afford to buy his cars. The strategy worked and he created many new customers that he would not have had otherwise. Using this example, if the restaurant, hotel and retail industries raised their prices, some existing customers would clearly buy less. But, there would be so many new customers who could afford to go to a restaurant or travel or buy more from retail than they did before. My uneducated guess is that the additional demand would dwarf the reduced demand from existing customers.

    I would think it would probably make sense to phase the minimum wage increase in over a 3-5 year period to give the economy time to adjust

    CONCERN 5—IF WE RAISE THE MINIMUM WAGE, COMPANIES WILL CUT BACK ON PEOPLE TO KEEP THEIR COSTS IN LINE.
    While I am sure this is somewhat true, given how competitive business is, how many currently have so much excess labor that they can just cut back and still provide the high quality customers demand? While there will be some, I would not think it would be drastic.

    CONCERN 6—THIS IS NOT RIGHT. WHY SHOULD PEOPLE WHO HAVE LITTLE EDUCATION AND OTHER QUALIFICATIONS EARN SO MUCH. LET’S JUST LET THE CAPITALIST SYSTEM WORK IT OUT ON ITS OWN. IT IS UN-AMERICAN.
    In the not so distant past, the percent of people in the manufacturing sector was much larger than it is today. In 1953, manufacturing employed 32% of workers. By 2015, it only employed 8.7% (https://www.stlouisfed.org/on-the-economy/2017/april/us-manufacturing-really-declining). At that time, a great many manufacturing jobs were unionized and paid a middle class wage. Does working on an automotive assembly line putting tires on a car require more education and other qualifications vs cleaning a hotel room or serving customers in a restaurant or a retail store? I think not. It is only in more recent history that we invented the thinking that there ought to be a correlation between education/other qualifications and wages; that people who do not have an education, should be in the lower economic class. I assert that is purely a made up story. It was not true just a short time ago, it is not currently true in many nations in Europe and it need not be true for us now.

    For those that argue that the capitalist system should work it out on its own, the counter is that, if laws which support unionizing were strengthened, workers would have a stronger negotiating position to get higher wages, just as they did in the manufacturing sector a number of years ago. I have personally had experience that unions have their own set of problems so I would favor much higher minimum wages as a solution. But that is just me.

    I am not an economist so there are clearly issues that we need to understand better, if we are to proceed with a significant increase in the minimum wage, including:

    ** how much inflation will this change cause, over what period of time and what will be the consequences?
    ** while we might not lose a huge number of jobs to lower cost countries, we likely will lose some. How many and will it be likely that those who lose their jobs will be able to find employment elsewhere and, of course, at the same minimum wage.
    ** The payback for automating will be improved. But, companies such as Amazon are already investing in automation to eliminate even our current low cost jobs. For example, in their stores, there are no people manning cash registers. Will an increase in the minimum wage cause even greater automation than what is likely to happen anyway and if so, how much?
    ** Will having a middle class wage guaranteed reduce the incentive for people to strive for something bigger and more?

    An adjacent point to the significant minimum wage increase strategy. In my opinion, all the current rhetoric about income inequality is misplaced. I don’t believe most people care that a few, like Jeff Bezos or Warren Buffett, make as much as they do (actually, as an aside, while they are among the wealthiest people in the world, their salaries respectively are $81,840 and $100,000. It is the stock they own in the companies they founded which accounts for their wealth). What people are angry and frustrated at is that they were once middle class and now aren’t and neither they nor those who have always been in a lower economic class see a way to become middle class. The issue is that many Americans, who used to work in unionized, manufacturing jobs, had middle class wages and, with the decline of manufacturing, these jobs have gone away permanently, replaced by low paying service jobs. And, at present, there are not too many ways forward for most people from these low paying, service industry jobs. Those who were middle class, yearn to have the standard of living they used to and those who have not been in the middle class want a way to attain it. That I believe is what the anger and frustration is all about. It is not that the wealthy have so much, it is that the lower economic class sees few ways to improve their lot in life. Having a significantly higher minimum wage would provide the people in the lower economic class with a good living, allowing the middle class in the US to again be robust and sizable.

    Last comment—Whether one pursues the safety net or minimum wage strategy or both, it would appear that an increased percentage of the spending and focus of the non-profit services sector will need to be devoted to advocacy and gaining the political support at the federal level since the minimum wage strategy and, I assume, the safety net strategy will both require the federal government to get on board and support it.

    I apologize for such a long response. I hope at least some of it is useful in furthering the conversation and our collective thinking.

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