Pandemic Aid Helps Make the Case for Basic Income: Noah Smith
The relief programs supporting Americans through the pandemic are also demonstrating the viability of a bold proposal for reducing poverty: basic income.
The idea of basic income -- paying a monthly fixed amount to each person in the country -- has been around for a long time. Recently it has gained more attention and support. It has the advantages of simplicity and universality, but one big question has always loomed: What if it stopped people from working? Ultimately, society’s wealth is based on human beings producing things, and if people feel that a basic income means they don’t need to work, they might stop producing altogether, leaving society poorer.
Empirical studies and limited experiments have generally found that basic income does little to discourage paid work. But these studies have lacked the scale to tell us much about how a large nationwide program would work.
Now, the national response to the coronavirus pandemic is giving us some valuable information. The Coronavirus Aid, Relief, and Economic Security (Cares) Act, passed in March, provided a small payment to every adult, but it also delivered very generous unemployment benefits to American workers who lost their jobs because of the pandemic. Under this program, a family of four with one laid-off worker would receive $4,100 a month, in addition to normal unemployment benefits. That’s in the ballpark of the country’s median family income of $4,920 -- in other words, an unprecedentedly large cash handout.
This benefit was so generous that -- according to a new working paper by economists Jeehoon Han, Bruce Meyer and James Sullivan -- it actually reduced poverty in the U.S., compared with the pre-pandemic period. And so far, it seems to have accomplished this without deterring people from working.