Universal Basic Income and Job Guarantees: Feasible or Unrealistic? To: Representative Cecil Brockman, NC State House Representative By: Stephanie Cutler, Brennan Zook, and Elijah Williams

A is more feasible to implement at a state-level than a universal basic income, given its lower cost in relation to raising the standard of living. The greatest barriers to feasibility lie in state funding and questionable policy sustainability. In order to address North Carolina’s issues of and , a job guarantee should be im- plemented at a local level by offering on-the-job training through North Carolina’s Work First program.

The Current State of North Carolina’s Em- ployment, Poverty, and System: NORTH CAROLINA QUICK FACTS North Carolina currently maintains a 3.9% seasonal- NC USA ly-adjusted unemployment rate, totaling slightly over seasonally-adjusted 3.9% 3.8% 194,000 people.1 This is below the Federal Reserve’s unemployment rate: recommended 4-5% range.2 According to the Federal Poverty Rate: Reserve, the natural rate of unemployment should be 15.4% 12% maintained in a healthy economy. The low unemploy- ment rate may indicate a slowing economy and more median household $50,584 $57,617 jobs available than individuals looking. However, the income: rate varies by county. For example, Hyde County has an unemployment rate of 13.3%.3 Universal Basic Job Guarantee The poverty rate in North Carolina (shown in the Income graphic) exceeds the national poverty rate, demon- Definition: Definition: strating the need for the state to address poverty “a cash payment granted to all direct job creation for every- and inequality. The poverty rate varies from county members of a community on one searching for jobs in the a regular basis, regardless of workforce to county. For example, Hyde County has a poverty status or income rate of 22.4%, while Dare County’s poverty rate is level”10 Pros: 4 • creates higher reservation 8.2%. As of 2016, the median household income was Pros: job option for Americans $50,584 in North Carolina, below the national median • means to fight working low-wage jobs 5 by providing security for • could mitigate stresses of $57,617. Furthermore, the top 1% in North Caro- workers caused by being unem- lina receive an average income of $903,000, in com- • creates higher reservation ployed job option for Americans • potential to create full parison to the remaining 99% that average $44,000 working low-wage jobs employment per year.6 • freedom to return to school • decrease government • cheaper than current wel- expenditures for unemploy- fare system ment insurance and health Currently, the welfare system in North Carolina • help stabilitze economy care during recessions • increase standard of living costs the state over $30 billion dollars every year, but • increase standard of living Cons: is not effectively using the state’s money.7 Both state Cons: • administrative costs -- • substantial costs to achieve requires apprenticeship and federal funds contribute to welfare programs like livable income or training programs for Temporary Assistance for Needy Families (TANF). It • could trigger inflation different fields • could disincentivize people • could disincentivize people is estimated that welfare progams in North Carolina to work hard to work hard lift 1.7 million people above the poverty line.8 How- • perpetuate falling labor • decrease private sector force participation rate supply of work ever, roughly 1.4 million people still live below the • could reduce funds for • could trigger inflation poverty line, and many more individuals struggle to welfare programs, public • limited job opportunities in 9 health, and public edu- low/common skill jobs make ends meet. cation POLICY OPTIONS: to reversal. Residents may prefer to preserve well-es- For North Carolina, the two greatest feasibility tablished welfare programs to disassembling them in concerns for a state-level UBI or job guarantee are favor of a UBI program which may be soon reversed. funding and sustainability. Previous trials, such as in Finland, were cancelled as public support waned and the stipend proved inade- Universal Basic Income: quate.16 Universal Basic Income (UBI) offers potential on a national level, but currently is not sustainable at the Option: Implement UBI at a Local Level state level to address unemployment and poverty. It is A UBI could be scaled-down and implemented in intended to be an individual, unconditional, and fre- North Carolina at a local level; however, the feasi- quent payment, in order to counter job-loss from au- bility concerns and high-cost nature of a UBI make tomation.11 Traditional UBI policy lacks means-based this policy option inadequate to combat unemploy- testing or work requirements typical in welfare policy. ment and poverty. A local approach targeting coun- ties with high unemployment and poverty rates could Barrier: State-Level Funding mitigate the high-costs for state UBI implementation. Finding adequate funding for a UBI is more fea- The targeted approach would address some inequality sible nationwide than statewide because states lack among counties. Additionally, the policy could pro- adequate discretionary funds. In “Raising the Floor”, vide a UBI for part-time workers, single-mothers, and outlines a feasible solution to implement households that fall under the poverty line, building a nationwide UBI of $12,000 per year per adult. To on North Carolina’s Work First cash assistance pro- cover the approximate $2.7 trillion cost, he notes that gram. most antipoverty programs, earned income tax cred- its, military spending, tax breaks, must be cut and a Job Guarantee: permanent fund must be created.12 While state’s poli- A job guarantee (JB) would entail every unemployed cy costs are lower with smaller programs, states have citizen being promised employment opportunity from fewer “disposable and discretionary funds” to easily the government of North Carolina. It would “act as a reallocate, ultimately limiting the success of a UBI on de facto employment floor in the labor market.”17 Pri- a state scale.13 vate sector jobs are presently inadequate, as 44% of the US homeless population have a job, but are unable The Permanent Fund (PFD) is the closest ap- to afford shelter.18 The job would also be accompa- proximate to successful state-level UBI policy, though nied by a sustainable wage and employment benefits it is not replicable in North Carolina due to wel- such as medical leave and retirement security. fare-drive migration and a lack of profitable sources of income. Since 1982, the PFD provides adult residents Barrier: State-level Funding for Training Programs with an annual flat cut of state oil dividends ($1600 According to experts, JBs would require both new last October), typically preventing 2-3% of the Alas- government infrastructure and funds to guarantee kan population from slipping into poverty.14 However, public sector jobs. Many industries require skilled research illustrates a moderate welfare-driven migra- workers. The government would need to provide lo- tion for residents along state borders, an issue Alaska cal on-the-job training, and apprenticeships for those does not have.15 Furthermore, North Carolina lacks a occupations.19 natural resource as steadily abundant and profitable as Alaskan oil. Option: Implement JB at Local Level through NC’s WorkFirst Program Barrier: Sustainability The government of North Carolina could provide North Carolina’s partisan instability makes a state public employment opportunities that pay, at min- UBI politically unsustainable. North Carolina is a imum, a livable salary according to the county in swing state with resulting frequent leadership chang- which that workers lives. The state could implement es; budgets and legislation are particularly susceptible a JB by building off of the Work First cash assistance County and Area Employment Figures Released.” 15 Mar. 2019. URL: program. The program currently includes benefit di- https://files.nc.gov/nccommerce/press-release/files/Jan_2019_coun- ty_release_-_combined.pdf version -- a lump sum payment for families experi- 4 Data USA. “North Carolina.” https://datausa.io/profile/geo/north-car- encing financial difficulties related to unemployment olina/ -- and emergency assistance, for households require- 5 Ibid. ing temporary help paying for utilities.20 It additional- 6 Debruyn, Jason. “Income Inequality in NC Surpasses Pre-Reces- ly offers services to increase chances of employment. sion High. WUNC 91.5: North Carolina Public Radio. 20 July 2018. https://www.wunc.org/post/income-inequality-nc-surpasses-pre-reces- This program may be adjusted to incorporate the job sion-high guarantee strategy. Instead of job-training facilities, 7 North Carolina Government. “OpenBudget.” https://www.nc.gov/ this program would create on-the-job training within government/open-budget industries like construction or mining. 8 Center on Budget and Policy Priorities. “In North Carolina, Safety Net Lifts Roughly 1.7 Million People Above Poverty Line and Pro- vides Health Coverage to 52 Percent of Children.” https://www.cbpp. Furthermore, a JB would be a better strategy to com- org/sites/default/files/atoms/files/7-22-16pov-factsheets-nc.pdf bat poverty compared to a UBI, because it could guar- 9 Talk Poverty. “North Carolina 2018 Report.” https://talkpoverty.org/ antee a higher standard of living with lower govern- state-year-report/north-carolina-2018-report/ ment expenditures.21 It would provide more stability 10 Basic Income Lab. “Basic Income in Cities: A Guide to City Exper- if the economy dips into a recession. iments and Pilot Projects.” 2 Nov. 2018. https://basicincome.stanford. edu/sites/g/files/sbiybj7921/f/basic_income_in_cities_toolkit_share- able_11-2-18.pdf 11 Ibid. POLICY 12 Stern, Andy. Raising the Floor – How a Universal Basic Income Can Renew Our Economy and Rebuild the American Dream. European RECOMMENDATION: Journal of Risk Regulation, vol. 8, no. 4, 2017, pp. 811-81 North Carolina should implement a localized 13 Ballotpedia. “North Carolina state budget and finances” June 2017. job guarantee program that targets counties https://ballotpedia.org/North_Carolina_state_budget_and_finances 14 Reamy, Random, and Matthew Berman. “Permanent Fund Div- with high unemployment and poverty by build- idends and Poverty in Alaska.” Institute of Social and Economic ing upon the Work First program. The option’s Research. Anchorage, Alaska, 2016. 10 Oct. 2018. feasibility is constrained by the state budget, but 15 McKinnish, Terra. “Welfare-Induced Migration at State Borders: the county-specific approach would reduce costs to New Evidence from Micro-Data.” National Institute of Health. April an implementable level. A JB would offer the best 2007. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3177299/pdf/ nihms320787.pdf increase in living standard relative to governmental 16 Arnold, Carrie. “Money for Nothing: The Truth About Universal Ba- cost. A smaller approach should further ensure that sic Income.” 30 May 2018. https://www.nature.com/articles/d41586- the people receiving a JB would have an appropriate 018-05259-x wage to achieve livable standards. 17 Paul, et al. “The Federal Job Guarantee - A Policy to Achieve Perma- nent Full Employment.” Center on Budget and Policy Prioties. March 2018. https://www.cbpp.org/sites/default/files/atoms/files/3-9-18fe.pdf This policy is additionally more politically feasible. 18 Ibid. It builds upon existing policy, rather than a UBI that 19 Darity, W. & Hamilton, D. Intereconomics (2018) 53: 179. https:// would require nixing welfare spending and raising doi.org/10.1007/s10272-018-074 taxes. It is therefore more likely to reduce the varied 20 NC Department of Health and Human Services. “Work First Cash poverty and unemployment across the state, for the Assistance.” https://www.ncdhhs.gov/assistance/low-income-services/ work-first-cash-assistance long-run. 21 Harvey, Philip. “More for Less: The Job Guarantee Strategy.” Basic ______Income Studies. January 2012. https://doi.org/10.1515/bis-2013-0006 ENDNOTES: 1 North Carolina Department of Commerce Demand Driven Data De- livery System. “Local Area Unemployment Statistics.” URL: https:// d4.nccommerce.com 2 Board of Governors at the Federal Reserve System. “What Is the Lowest Level of Unemployment that the U.S. Economy Can Sustain?” https://www.federalreserve.gov/faqs/economy_14424.htm 3 North Carolina Department of Commerce. “North Carolina’s January