Welfare Reform or Welfare Expansion?

St. Louis City Mayor Tishaura O. Jones wants St. Louis to join a growing list of American cities that have started experimenting with “guaranteed basic income” programs. Her administration hopes to use $5 million from federal pandemic aid to establish this program and fulfill her promise to tackle poverty.

Welfare programs often create perverse incentives regarding work; recipients don’t look for jobs due to the risk of reaching a level of income that would cause them to lose access to the welfare program. Because of this problem, welfare programs can exacerbate the poverty problem they are intended to fix.

Politicians have floated the idea of a universal basic income (UBI) many times as an antidote to the incentive problems welfare programs tend to create. Andrew Yang made it a prominent plank in his 2020 presidential campaign, promising to give out $1,000 per month to every American adult if elected. Since UBI offers every single person (rich and poor alike) a certain amount of money per month, no strings attached, its proponents argue that it wouldn’t create an incentive against working.

Some free-market economists have argued that the replacement of welfare programs with UBI could reduce the bureaucratic power of government—the state would have less of a say over how people choose to live or spend their money. Charles Murray emphasized replacement as a key feature of UBI implementation:

The first rule is that the basic guaranteed income has to replace everything else — it’s not an add-on. So there’s no more food stamps; there’s no more Medicaid; you just go down the whole list. None of that’s left. The government gives money; other human needs are dealt with by other human beings in the neighborhood, in the community, in the organizations.

For UBI to serve as a tool that helps low-income individuals while increasing government transparency and decreasing state paternalism, it must be accompanied by a complete overhaul of how the welfare state currently functions.

The proposal put forward by the City of St. Louis disregards all of the wisdom stated above. First, the incentive problem that UBI tries to address is mostly ignored in the guaranteed basic income (GBI) program. Recipients of the “free” money must fall at or below a certain mark of the poverty level, which could create an incentive against working. Second, the proposed GBI program would not replace other social welfare programs. A spokesman for Mayor Jones expressed that one of the administration’s priorities is to ensure that the GBI program does not force its recipients off other government benefits, such as food stamps, for fear that it “might leave residents worse off.” In other words, Mayor Jones is not looking to reform the current welfare programs in St. Louis—she is hoping to establish another one.

Additionally, this proposal does not address concerns about the future sustainability of such a program. Mayor Jones proposes using money the city received from the federal government in pandemic aid to pay for the program. Once the $5 million is handed out, how does the city plan to keep funding this program?

If the mayor really wants to help low-income individuals, how about using the $5 million to improve the bus system that has seen massive service cuts in recent years? The reductions in bus lines have negatively affected many low-income individuals who rely on buses to get around St. Louis.

In any case, countless problems accompany the program Mayor Jones proposes. As tends to be the case in public policy, closer attention to incentives and to future financial viability could help the City of St. Louis craft proposals that would better serve the poor of St. Louis.