How a Universal Basic Income Would Affect Poverty

I made this basic income calculator just to see what a basic income of varying levels would do to the official poverty rate. For those not familiar, a basic income is a universal cash income that every person gets from the government every year. For these purposes, children also receive the basic income, though it would presumably flow to their parents. As a comparison, a basic income is more or less the same thing as Social Security, except everyone receives it, not just the elderly.

To estimate its effect on poverty, I used the 2012 Census data released a short time ago. I went through each family that was coded as being in poverty, and added the basic income to their regular income. If the family's new income was still below their poverty threshold, they show up as still below poverty in the calculator. If not, then not. For this calculation, I assume those on Social Security also get this basic income. But if you exclude those on Social Security from it (on the theory they already have a basic income), the total cost drops about 15 percent at every basic income level.

So what does the calculator show us? First, we could have around a $2,200 basic income for the money we spend on the military each year. For a family of four, that would be an income boost of $8,800. It would reduce official poverty by about 16 million people, and of course boost the incomes of those who still remain in poverty by quite a bit.

What would it take to halve poverty? About $3,000 basic income. This translates to $930 billion dollars ($790 billion if you exclude Social Security recipients), which is about 5.7% of GDP. This is quite a bit of money, but we are a rich country and if we really wanted to, we could definitely make this happen.

To be sure, a basic income is not a program that specifically targets the impoverished. As I wrote last week, the total number of dollars needed to bring every impoverished person above the poverty line is something around $175 billion. By not targeting the money directly at the poor, the basic income costs quite a bit more to achieve any given amount of poverty reduction.

But one of the real charms of the basic income is precisely that it is not targeted. This ensures that poor people who receive it do not have to concern themselves with the possiblity that they will lose it if they work more. It also likely means there will be a larger political constituency behind it, just like Social Security has.

Beyond the poverty reduction angle, a universal basic income is useful because it helps separate income from employment, at least to some degree. This will provide workers a bit more security should they get laid off and also reduce the leverage their bosses have over them.

Ultimately, I think reasonable people can disagree on the basic income as a policy strategy. But it is interesting I think to actually see the numbers laid out like this, even with a simple model like the one I used.