“Universal Basic Income” Explored in Hawaiʻi

A bill that that was passed in the Hawaiʻi legislature this session is among the first in the nation to explore the concept of universal basic income.

There’s been other places internationally that have experimented with the idea like Europe, Uganda and the Canadian province of Ontario, but the concept is fairly new in the US and is considered uncharted territory with the exception of a pilot program in Oakland, CA.  Honolulu resident, Pierre Omidyar, the billionaire co-founder of eBay, is also providing the financial backing for a program in Kenya.

Ending Extreme Financial Poverty, Creating and Equitable Future:

Under universal basic income programs, individuals collect income through a regularly issued stipend, and use it however they see fit.

According to the Hawaiʻi legislation, the availability of universal basic income would allow individuals seeking job retraining or working part-time to maintain a basic standard of living. The measure states that the concept of universal basic income is analogous to providing social security to every citizen at a level sufficient to cover their basic needs, but backers note that the program is totally separate and quite different.

Rep. Chris Lee. PC: Courtesy Hawaiʻi House Blog.

“Government is not collecting money and holding it in a trust at all,” said Representative Chris Lee (D-51, Kailua, Waimanalo) who introduced HCR 89.  Instead, the funds for universal basic income could be obtained through a variety of means–mechanisms of which could include an expanded earned income tax credit, monetizing public resources or placing an incentive on productivity.

“Everything is on the table,” said Rep. Lee in an exclusive phone interview with Maui Now on Friday.  “We are at an unprecedented place in history where our economy is changing far more rapidly than mechanisms can keep up with; and if we do nothing the cost to taxpayers will skyrocket as unemployment rises, and the existing social safety net will be overwhelmed,” he said.

Under House Concurrent Resolution 89, the state is being directed to establish a working group focused on basic economic security to address a growing income gap as well as the increasing cost of living in Hawaiʻi.

In drafting the legislation, supporters noted that universal basic income “would allow more people to share part time work between the fewer number of jobs that may be available, while lifting burdens on businesses, and providing a more secure and substantial safety net for all people.”

For a state that has been dealing with issues surrounding homelessness and affordable housing, HCR 89 further states that the program is aimed at “ending extreme financial poverty, and providing for a more financially sustainable and equitable future for all citizens in spite of coming economic disruption.”

The idea of universal basic income is far from new.  In fact, there have been several noted backers in modern history including the likes of Martin Luther King Jr., Richard Nixon and Pierre Trudeau.

How Does it Work?

The Kenya program utilizes funds from donors and makes cash transfers to individuals in extremely poor communities.  The communities are found using publicly available data.  Then field staff are sent door-to-door to collect data on poverty and enroll beneficiaries who receive an estimated $1,000, about a year’s budget for a typical household.

The Oakland pilot program, Y Combinator, launched last year and is an umbrella group funded by tech companies that provides seed funding for startups in the Bay Area.  The program makes small investments in return for small stakes in the companies they fund.

Rep. Lee said there are various mechanisms that can provide funding, and not all have to come from the government, donors or private investors.  He pointed to Apple’s iPhone manufacturer, Foxconn as an example, noting that the company laid off 60,000 factory workers in 2016 in favor of machines that do the same repetitive tasks through automation.

Creating Income in an Automated World:

Rep. Chris Lee. PC: Hawaiʻi House Democrats Flickr.

Using that as an example Rep. Lee said, “The biggest way to think about this is that right now you have all these major industries that are automating resources… If instead a portion of that additional revenue was used to give back to the people–because robots took their jobs–the company still earns a massive profit, but now there’s an actual revenue stream to support the people left unemployed.”

By incentivising productivity Rep. Lee said, “people are earning a dividend off of innovation and because of that we all win, and people will have money to spend.”

He said that the alternative to that would be an upward trend in unemployment, lack of money to spend, suffering industries and a viscous downward cycle.

“So as innovation occurs, and automation continues to take more jobs away from people, we need to find a mechanism that ensures that we as a society continue to benefit, and our economy is kept stable… and this is what this is all about,” said Rep. Lee.

Rep. Lee said that according to data compiled by various departments, “we know about 45% of all work being done in economy today can be automated using existing technology.”  He continued saying that 47% of all jobs exiting today could be lost to automation in the next 20 years.  Putting that into prospective, peak unemployment during the Great Depression maxed out at 25%.

“There’s a real concern here,” said Rep. Lee who pointed to his two-and-a-half month old niece as an example.  “By time she graduates high school, we could see a huge portion of the jobs in our economy disappear and her generation will have little opportunity through no fault of their own.  The question is how do we ensure a stable economy as unemployment continues to grow and ensure most of all that people have opportunity and are able to find meaningful opportunity.”

Will Beneficiaries Take Advantage of the System?

Rep. Crhis Lee. Courtesy photo.

Rep. Lee said there’s a lot of misunderstanding of what universal basic income is.  “People have a tendency to try to fit an idea like this into an ideological box.  It’s not conservative or liberal, democrat or republican.  More importantly, its about what options are available to best be able to address the changing economy and loss of jobs to automation that we’re experiencing.”

Opponents to universal basic income programs have suggested that beneficiaries would take advantage of the program by using funds for non-necessity items and frivolous things, but supporters say studies from trials show otherwise.

“Even in a close to automation world where fewer people have the opportunity to find work, providing a basic income does not lead to people being lazy, but encourages entrepreneurship, taking risks to start new business, and finding other ways to pursue their own passion and find meaningful work,” said Rep. Lee.

“What makes it so successful is there are no strings attached.  You don’t have government bureaucracy telling people what they can and can’t spend their money on.  It’s up to people to decide for themselves.  Just as with a Social Security check–people know better how to spend their money and what’s important to them,” said Rep. Lee.

Hawaiʻi Testimony Shows Support: 

In written testimony, Jason Bradshaw Hawaiʻi State AFL-CIO, COPE Director expressed support for the measure saying, “Hawaiʻi’s cost of living continues to rise yet wages remain stagnant or significantly below a living wage needed to survive in the state of Hawaiʻi.  Establishing the a basic economic security working group will help determine the path needed to ensure workers are provided a living wage and financial security in the state of Hawaiʻi.”

Randy Perreira Executive Director of the Hawaiʻi Government Employees Association agreed saying, “HCR 89 takes the first necessary step toward considering the long term implications that globalization and increasing automation will have on local jobs and our economy.”

He said, “Hawaiʻi’s high cost of living coupled with the exponential growth of innovative technologies have already begun to reshape our economy across all sectors and have contributed to financial challenges for many families earning less than a living wage.  Now is an appropriate time to examine and ensure a viable financial path forward for workers whose industries may be evolving.  We must ensure a future in which everyone will have access to financial prosperity.

The Chamber of Commerce Hawaiʻi was among the organizations that also expressed support saying the working group will provide the state with much-needed direction and a foundation of ideas that can help leaders in both the public and private sectors “identify new opportunities for steady economic growth beyond a tourism base.”

UNITE HERE Local 5 – a local labor organization representing 11,000 hotel, health care and food service workers throughout Hawaiʻi also submitted testimony saying, “It is a shame that Hawai’i’s residents in poverty pay more in state taxes than all but three other states, yet our cost of living is the highest in the nation. Hawai’i can do better. One of the most profitable industries to have taken root in our islands continues to see record number of visitors and profit levels, yet we are losing hundreds and hundreds of good local jobs. Hawai’i can do better, and we can start by ensuring that we don’t tax those families who are barely getting by as it stands.”

Reservations Expressed Over Resources, Priorities:

During legislative testimony, the Department of Business, Economic Development, and Tourism noted that it did not currently have sufficient resources to convene a working group and requested an additional Economist position to be able to undertake legislative initiatives such as this one.

Department of Labor and Industrial Relations also expressed similar concerns.  “The two entities in DLIR that would participate in this working group (Workforce Development Division and Workforce Development Council) face significant cuts in funding as the Trump Administration has indicated in its ‘skinny’ budget that it is specifically targeting reductions in funding for workforce development,” department representatives said in written testimony.  “Therefore, DLIR would require additional resources to participate in the working group provided its passage appropriates funds and does not adversely affect priorities identified in the Governor’s Executive Budget request.”

Similarly, University of Hawai‘i at Mānoa Dean College of Social Sciences Denise Eby Konan said the University of Hawai‘i Economic Research Organization is willing to participate in the working group, but not without faculty resources to do so.

Hawaiʻi’s Conversation Begins:

The resolution was adopted in its final form in May of 2017.  Work now includes the identification of stakeholders and the beginnings of Hawaiʻi’s conversation on universal basic income.