There's an even better solution to poverty than a $15 minimum wage

minimum wage protest
Jim Young/Reuters

Bernie Sanders and Hillary Clinton spent a great deal of time debating the merits of raising the minimum wage at the last Democratic debate on April 14.

Advertisement

Sanders, ever the radical, stood behind the popular $15 minimum wage figure that will soon take hold in California and New York. Clinton, who's long pushed for $12, updated her position in support of $15 figure.

Both could be misguided.

While raising the minimum wage does make sense on paper — working people need to make more to survive than they can on today's minimum wage, so we should give them more money  — mounting evidence suggests even a $15/hour wage isn't drastic enough. The smarter solution could be giving people enough money to live regardless of their working status.

That idea, known as universal basic income, has had a surge in popularity over the last year. 

Advertisement

The Dutch city of Utrecht recently announced it would start a basic income experiment in 2017, as did Finland and Ontario, Canada. Talks are underway in Switzerland, New Zealand, and the US, and the largest basic income experiment in history is slated to launch later this year in Kenya.

Ostensibly, the goal of ensuring the basic welfare of citizens falls under the purview of the government. Trying to use the minimum wage to achieve that outcome puts pressure on smaller businesses that may cause them to lay people off. In that event, the minimum wage does more harm than good. Businesses lose staff, and citizens lose income.

By removing the work requirement, basic income skirts around the problem by giving money to people up front. It frees people up to pursue jobs that may not pay as much as they'd like, and it spares the employer from dealing with the burden of providing a wage it may not be able to sustain. 

There's another wrinkle that makes basic income more valuable as time goes on: Workers may not be as useful in the future.

Advertisement

The latest evidence suggests automation could displace half the American workforce in the next two or three decades. That means millions of people could be out of work, or at least working for lower wages than they currently do. 

With fewer employees, hitting a higher minimum wage might not be as hard for employers. But we'll still be left with unemployed people who need to survive. Basic income covers both groups — the employed and the displaced. 

The upside is that productivity doesn't plummet under basic income; if anything, it tends to rise. Study after study has shown that people work harder when they know they have a safety net protecting them. 

And that's good for businesses, which won't have to worry that minimum wage — a system designed to help workers — could end up tanking them in the process.

Advertisement

Basic income is the more effective solution because it gives employees reassurance they'll be able to put food on the table while giving employers peace of mind that they won't get crippled by their payroll. 

Advertisement
Close icon Two crossed lines that form an 'X'. It indicates a way to close an interaction, or dismiss a notification.

Jump to

  1. Main content
  2. Search
  3. Account