WORCESTER – The City of Worcester has awarded $250,000 in American Rescue Plan Act (ARPA) funds to the Worcester Community Action Council (WCAC) for a two-year pilot of a universal basic income (UBI) program that will affect 52 low-income families. WCAC expects the pilot to begin in mid to late fall 2023.
The plan will provide a guaranteed monthly income supplement with 52 low-income taking part households, with 26 enrolled in the first year and another 26 added in the second year. The full criteria for participation has yet to be determined.. Participating households will receive a monthly income supplement of $100 to $500 per month and both provide feedback and data throughout the program.
Participating households will have access to additional support through cohort-style financial empowerment workshops and coaching and a suite of financial empowerment tools. Requirements for participation include how funds were spent in categories that include food, housing, household supplies, technology, and job training activities. WCC intends to show what people spend the money on to overcome various barriers in their life such as food security, childcare, transportation, etc., and if the supplemental income allows them to access greater opportunities including work, housing retention, car repairs, savings, credit building/debt reduction, and beyond.
Most UBI models only include a monthly supplement. The WCA model adds coaching services using EMPath’s Economic Mobility Mentoring model as a foundational approach. Based on coaching interventions that use the Bridge to Self-Sufficiency model, WCAC will track the categories of goals set by the household at the time of their first coaching session, such as employment, finance, well-being, housing, or education.
The Economic Argument for UBI
Universal Basic Income gained its highest level of awareness through business executive and attorney Andrew Yang’s campaign for the Democratic Party’s nomination for President of the United States in 2020. His proposal included a $1,000 monthly subsidy for every American and constructing income tax policy to target the subsidy to those within certain income ranges.
The concept envisions monthly payments to every American, which would enable low-income families to meet basic needs and increase disposable income among those in the middle class. At upper income levels, where the subsidy would make little difference in their economic reality, they would pull the funds out of the economy through income tax policy. The concept seeks to insert additional liquidity in the economy where it will be spent and contribute to economic growth.
Since 2010, they have launched pilot programs in several countries. Spain has an income guarantee system and Iran issues a monthly cash subsidy which replaced product-based subsidies over 10 years ago. One province in South Korea gives every 24-year-old citizen a quarterly subsidy eligible to be spent only at local businesses. There are several other examples of programs similar to UBI across the world.
Detractors of UBI programs argue that basic income increasing disposable income will be inflationary by creating an additional demand for products and services. Advocates argue that UBI does not create new currency, the underlying factor which drives inflation.
Two prominent economic impacts are common arguments advanced by advocates of UBI.
The Cost of Administering Means-Tested Programs
“Administrative Burden,” by Georgetown University scholars Pamela Herd and Don Moynihan, published in 2018, won multiple non-fiction book awards. Heard and Moynihan’s research found that the administrative cost for main family assistance supplemental programs can range from 15 percent to 40 percent of the total budget. This includes costs for processing applications, interviewing applicants, verify documents and otherwise determining applicant eligibility.
The Supplemental Nutrition Assistance Program (SNAP), often referred to as food stamps, is a federal program that provides funds to purchase food to low-income people and families. Income and household size, with different amounts available to those ranging from below 130 percent to 200 percent of the Federal Poverty Level restricts eligibility for the SNAP program. Over 41 million Americans received SNAP benefits under the program in 2022, with temporary pandemic relief raising the cost of the program to $3.14 billion. For a household of three in 2023, that ranges from below $2,495 to $3,840 in income per month. The maximum benefit available in Massachusetts for a three-person household is $739.
Temporary Assistance for Needy Families (TANF), which provides cash assistance to low-income people, is a $16.5 billion block grant from the federal government to states to administer. The total funding has been the same each year since 1996. For a three-person household in Massachusetts, the maximum TANF benefit is $783 per month. There are many factors considered in determining eligibility for TANFDC, the Massachusetts program that distributes the state’s portion of the TANF block grant.
Using Herd and Moynihan’s research, administrative costs for SNAP range from $471 million to nearly $1.3 billion of its budget that does not reach those in need. Similarly, between $2.5 million and $6.6 million are spent in administration of the program.
UBI advocates argue that a basic monthly supplement for every American largely eliminates the need for programs like SNAP and TANF and the associated administrative costs. Eliminating these programs also ends the trap many low-income people receiving assistance face when with a small or moderate raise or promotion at work. If that raise or a new, moderately higher-paying job pushes their income over the limit for programs which someone currently enrol them, the overall result can be a loss of overall income.
Economic Changes through Artificial Intelligence, Automation, and other Technology
McKinsey Global Institute, the research arm of McKinsey & Company, the largest management consulting company in the world, predicts that automation will have far-reaching impacts on the global workforce by 2030. It says that around 50 percent or current work activities can technically be automated. It’s research predicts that 60 percent of jobs have over 30% of activities that can be automated. The study says that of an estimated workforce in 2030 of 2.66 billion, from eight to nine percent will be in new occupations.
McKinsey’s research also found that across the Worcester metro area, 44 percent of the tasks performed in 395,000 jobs could be automated.
Research in 2019 by the Brookings Institute provides details on the amount of automation possible for several professions. It says 100 percent of tasks in the following professions have automation potential.
- Packaging and Filling Machine Operators and Tenders
- Opthalmic Laboratory Technicians
- Machine Feeders and Offbearers
- Plaster and Stucko Masons
- Logging Equipment Operators
- Motion Picture Projectionists
Brookings used 22 categories of jobs in its analysis and found production jobs had the most jobs automated at over 90 percent of tasks, at around 20. Food service has three jobs with over 90 percent of task with automation potential: food preparation workers, short-order cooks, and institution and cafeteria cooks.
Of the 22 categories, just seven did not list a job with “high risk,” defined as 70 percent of tasks able to be automated. They are facilities care, legal, management, education, social service, engineering, business. Here are the jobs in each of those categories with the highest percentage of tasks that could be automated:
- Pesticide Handlers, Sprayers, and Applicators, Vegetation: 69.5%
- Paralegals and Legal Assistants: 69.2%
- Gaming Managers: 68.6%
- Museum Technicians and Conservators: 59.5%
- Social and Human Service Assistants: 41.5%
- Cartographers and Photogrammetrists: 65.7%
- Tax Preparers: 48.9%
See the full information on many professions at the Brookings Institute by clicking “show detailed occupations” in the graphic under “Automation potential by major occupation group” in the middle of the page.
While studies vary on the level of job loss caused by automation, most agree on significant key predictions. Widespread agreement exists that the total number of jobs will be reduced and the requirements for workers will change rapidly, resulting in massive education and job training efforts across a significant portion of the economy. Manual labor and low-income jobs will be most affected. Overall, the economy will continue to grow but will need more skilled workers, and fewer workers overall.
Advocates of UBI argue that the combination of job loss and a difficult economic transition present the potential for extreme effects on the disposable income of consumers. A minimum basic income, advocates argue, is the most effective means of preserving consumers as customers of businesses in a consumption-based economy.
Based on income data, according to 2021 U.S. Census data, the predicted changes in the economy could disproportionately affect Worcester residents. Half of Worcester households earn less than $56,746 (median income). Per capita (per person) income is $30,855. The percentage of residents earning income under the poverty line is 19.3 percent. In 2021, poverty levels were annual earnings below:
- Single Person: $12,880 ($1,073 monthly)
- Two-person Family: $17,420 annually ($1,452 monthly)
- Three-person family: $21,960 ($1,830 monthly)
- Four-person family: $26,500 ($2,208 monthly)